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Efficient Dynamic Coordination with Individual Learning

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  • Amil Dasgupta
  • Jakub Steiner

    ()

  • Colin Stewart

Abstract

We study how the presence of multiple participation opportunities coupled with individual learning about payoff affects the ability of agents to coordinate efficiently in global coordination games. Two players face the option to invest irreversibly in a project in one of many rounds. The project succeeds if some underlying state variable theta is positive and both players invest, possibly asynchronously. In each round they receive informative private signals about theta, and asymptotically learn the true value of theta. Players choose in each period whether to invest or to wait for more precise information about theta. We show that with sufficiently many rounds, both players invest with arbitrarily high probability whenever investment is socially efficient, and delays in investment disappear when signals are precise. This result stands in sharp contrast to the usual static global game outcome in which players coordinate on the risk-dominant action. We provide a foundation for these results in terms of higher order beliefs.

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Bibliographic Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 175.

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Length: 24
Date of creation: 07 Nov 2007
Date of revision:
Handle: RePEc:edn:esedps:175

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  1. 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).
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  3. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, January.
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  5. Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275R, Cowles Foundation for Research in Economics, Yale University, revised Aug 2001.
  6. Monderer, Dov & Samet, Dov, 1989. "Approximating common knowledge with common beliefs," Games and Economic Behavior, Elsevier, vol. 1(2), pages 170-190, June.
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  8. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2007. "Dynamic Global Games of Regime Change: Learning, Multiplicity, and the Timing of Attacks," Econometrica, Econometric Society, vol. 75(3), pages 711-756, 05.
  9. Martin W. Cripps & Jeffrey C. Ely & George J. Mailath & Larry Samuelson, 2006. "Common Learning," Cowles Foundation Discussion Papers 1575, Cowles Foundation for Research in Economics, Yale University.
    • Martin W. Cripps & Jeffrey C. Ely & George J. Mailath & Larry Samuelson, 2008. "Common Learning," Econometrica, Econometric Society, vol. 76(4), pages 909-933, 07.
  10. Atsushi Kajii & Stephen Morris, . "The Robustness of Equilibria to Incomplete Information," Penn CARESS Working Papers ed504c985fc375cbe719b3f60, Penn Economics Department.
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  13. Morris, S & Song Shin, H, 1996. "Unique Equilibrium in a Model of Self-Fulfilling Currency Attacks," Economics Papers 126, Economics Group, Nuffield College, University of Oxford.
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Cited by:
  1. Duffy, John & Ochs, Jack, 2012. "Equilibrium selection in static and dynamic entry games," Games and Economic Behavior, Elsevier, vol. 76(1), pages 97-116.
  2. Sylvain Chassang & Gerard Padro i Miquel, 2008. "Conflict and Deterrence under Strategic Risk," NBER Working Papers 13964, National Bureau of Economic Research, Inc.

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