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Coordination Cycles

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Author Info
Jakub Steiner ()

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Abstract

Players repeatedly face a coordination problem in a dynamic global game. By choosing a risky action (invest) instead of waiting, players risk instantaneous losses as well as a loss of payoffs from future stages, in which they cannot participate if they go bankrupt. Thus, the total strategic risk associated with investment in a particular stage depends on the expected continuation payoff. High continuation payoff makes investment today more risky and therefore harder to coordinate on, which decreases today’s payoff. Thus, expectation of successful coordination tomorrow undermines successful coordination today, which leads to fluctuations of equilibrium behavior even if the underlying economic fundamentals happen to be the same across the rounds. The dynamic game inherits the equilibrium uniqueness of the underlying static global game.

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Publisher Info
Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 162.

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Length: 30
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:edn:esedps:162

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Related research
Keywords: Coordination; Crises; Cycles and Fluctuations; Equilibrium Uniqueness; Global Games.;

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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
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jakub Steiner, 2006. "Coordination of Mobile Labor," ESE Discussion Papers 152, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
    Other versions:
  2. Giannitsarou, Chryssi & Toxvaerd, Flavio, 2007. "Recursive Global Games," CEPR Discussion Papers 6470, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Toxvaerd, Flavio, 2007. "Strategic Merger Waves: A Theory of Musical Chairs," CEPR Discussion Papers 6159, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
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