Equilibria in a Dynamic Global Game: The Role of Cohort Effects
AbstractWe introduce strategic waiting in a global game setting with irreversible investment. Players can wait in order to make a better informed decision. We allow for cohort effects and discuss when they arise endogenously in technology adoption problems with positive contemporaneous network effects. Formally, cohort effects lead to intra-period network effects being greater than inter-period network effects. Depending on the nature of the cohort effects, the dynamic game may or may not satisfy dynamic increasing differences. If it does, our model has a unique rationalizable outcome. Otherwise, there exist parameter values for which multiple equilibria arise because players have a strong incentive to invest at the same point in time others do.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4995.
Date of creation: Apr 2005
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Other versions of this item:
- Paul Heidhues & Nicolas Melissas, 2006. "Equilibria in a dynamic global game: the role of cohort effects," Economic Theory, Springer, vol. 28(3), pages 531-557, 08.
- Heidhues, Paul & Nicolas Melissas, 2003. "Equilibria in a Dynamic Global Game: The role of cohort effects," Royal Economic Society Annual Conference 2003 104, Royal Economic Society.
- Paul Heidhues & Nicolas Melissas, 2003. "Equilibria in a Dynamic Global Game: The Role of Cohort Effects," CIG Working Papers SP II 2003-08, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-06-14 (All new papers)
- NEP-GTH-2005-06-14 (Game Theory)
- NEP-NET-2005-06-14 (Network Economics)
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