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Equilibria in a Dynamic Global Game: The Role of Cohort Effects

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Author Info
Heidhues, Paul
Melissas, Nicolas

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Abstract

We 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4995.

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Date of creation: Apr 2005
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Handle: RePEc:cpr:ceprdp:4995

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Related research
Keywords: coordination; equilibrium selection; global game; period-speciifc network effects; strategic complementarities; strategic waiting;

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Find related papers by JEL classification:
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
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information

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  1. Hikmet Gunay, 2008. "The role of externalities and information aggregation in market collapse," Economic Theory, Springer, vol. 35(2), pages 367-379, May. [Downloadable!] (restricted)
  2. Barbieri, Stefano & Mattozzi, Andrea, 2004. "Membership in Citizen Groups," Working Papers 1206, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  3. Eugen Kovac & Jakub Steiner, 2008. "Reversibility in Dynamic Coordination Problems," ESE Discussion Papers 183, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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  4. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2004. "Information Dynamics and Equilibrium Multiplicity in Global Games of Regime Change," NBER Working Papers 11017, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Toxvaerd, Flavio, 2007. "Strategic Merger Waves: A Theory of Musical Chairs," CEPR Discussion Papers 6159, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  6. Xavier Vives, 2009. "Strategic complementarity in multi-stage games," Economic Theory, Springer, vol. 40(1), pages 151-171, July. [Downloadable!] (restricted)
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  7. Amil Dasgupta & Jakub Steiner & Colin Stewart, 2007. "Efficient Dynamic Coordination with Individual Learning," Working Papers tecipa-301, University of Toronto, Department of Economics. [Downloadable!]
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  8. Christian Hellwig, 2004. "Dynamic Global Games of Regime Change: Learning, Multiplicity and Timing of Attacks (August 2006, with George-Marios Angeletos and Alessandro Pavan)," UCLA Economics Online Papers 279, UCLA Department of Economics. [Downloadable!]
  9. Kentaro Hatsumi, 2009. "A Coordination Game Model of Charitable Giving and Seed Money Effect," ISER Discussion Paper 0736r, Institute of Social and Economic Research, Osaka University, revised Sep 2009. [Downloadable!]
  10. Kentaro Hatsumi, 2009. "A Coordination Game Model of Charitable Giving and Seed Money Effect," ISER Discussion Paper 0736, Institute of Social and Economic Research, Osaka University. [Downloadable!]
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