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Coordination, Learning, and Delay

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  • Amil Dasgupta

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    Abstract

    This paper studies how the introduction of social learning with costs to delay affects coordination games with incomplete information. We present a tractable noisy dynamic coordination game with social learning and costs to delay. We show that this game has a unique monotone equilibrium. A comparison of the equilibrium of the dynamic game with the equilibria of analogous static coordination games explicates the role of social learning. The analysis is carried out for both endogenous and exogenous order of moves in the dynamic game.� In the limit as noise vanishes, social welfare is strictly ranked in these games, with the highest welfare achieved in the dynamic game with endogenous ordering. We demonstrate that exogenous asynchronicity is not a substitute for endogenous asynchronicity. We also show that under endogenous ordering, as noise vanishes, the efficiency of coordination is maximized at intermediate costs to delay. The robustness of these results is illustrated numerically away from the complete information limit, when closed forms are not avail-able. Our results have implications for the initial public offerings of debt, as well as for the adoption of new technology under incomplete information.

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    File URL: http://www.lse.ac.uk/fmg/workingPapers/discussionPapers/fmgdps/DP435.pdf
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    Bibliographic Info

    Paper provided by Financial Markets Group in its series FMG Discussion Papers with number dp435.

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    Date of creation: Dec 2002
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    Handle: RePEc:fmg:fmgdps:dp435

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    Web page: http://www.lse.ac.uk/fmg/

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    Cited by:
    1. 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.
    2. Iván Werning & George-Marios Angeletos, 2006. "Crises and Prices: Information Aggregation, Multiplicity, and Volatility," American Economic Review, American Economic Association, vol. 96(5), pages 1720-1736, December.
    3. 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.
    4. Adam Copeland, 2004. "Learning dynamics with private and public signals," Finance and Economics Discussion Series 2004-67, Board of Governors of the Federal Reserve System (U.S.).

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