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Reversibility in Dynamic Coordination Problems

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  • Eugen Kovac
  • Jakub Steiner

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Abstract

Agents at the beginning of a dynamic coordination process (1) are uncertain about actions of their fellow players and (2) anticipate receiving strategically relevant information later on in the process. In such environments, the irreversibility of early actions plays an important role in the choice among them. We characterize the strategic effects of the reversibility option on the coordination outcome. Such an option can either enhance or hamper efficient coordination, and we determine the direction of the effect based only on simple features of the coordination problem. The analysis is based on a generalization of the Laplacian property known from static global games: players at the beginning of a dynamic game act as if they were entirely uninformed about aggregate play of fellow players in each stage of the coordination process.

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Bibliographic Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 183.

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Length: 25
Date of creation: 16 Jul 2008
Date of revision:
Handle: RePEc:edn:esedps:183

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Keywords: : Delay; Exit; Global Games; Laplacian Belief; Learning; Option; Reversibility.;

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Citations

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Cited by:
  1. Kováč, Eugen & Steiner, Jakub, 2013. "Reversibility in dynamic coordination problems," Games and Economic Behavior, Elsevier, vol. 77(1), pages 298-320.
  2. Mathevet, Laurent & Steiner, Jakub, 2013. "Tractable dynamic global games and applications," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2583-2619.
  3. Araujo, Luis & Guimarães, Bernardo, 2013. "The effect of options on coordination," CEPR Discussion Papers 9294, C.E.P.R. Discussion Papers.
  4. Jakub Steiner & Laurent Mathevet, 2012. "Sand in the Wheels: A Dynamic Global-Game Approach," 2012 Meeting Papers 123, Society for Economic Dynamics.

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