The effect of options on coordination
AbstractThis paper studies how constraints on the timing of actions affect equilibrium in intertemporalcoordination problems. The model exhibits a unique symmetric equilibrium in cut-o¤ strategies.The risk-dominant action of the underlying one-shot game is selected when the option to delayeffort is commensurate with the option to wait longer for others' actions. The possibility of waitinglonger for the actions of others enhances coordination, but the option of delaying one s actionscan induce severe coordination failures: if agents are very patient, they might get arbitrarily lowexpected payoffs even in cases where coordination would yield arbitrarily large returns.
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Date of creation: 02 Aug 2013
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- 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
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-08-10 (All new papers)
- NEP-GTH-2013-08-10 (Game Theory)
- NEP-MIC-2013-08-10 (Microeconomics)
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