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Overcoming the Coordination Problem: Dynamic Formation of Networks

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  • Ochs, Jack
  • Park, In-Uck

Abstract

We analyze an entry game with multiple periods. In each period privately informed agents who have not yet joined decide whether to subscribe to a network. Subscribers derive benefits in future periods depending on the network size. We study the case where agents are sufficiently patient and show that there exists a unique symmetric equilibrium if the number of existing subscribers is common knowledge in each period. This resolves the coordination problem which is prevalent in markets with network externalities.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13905/1/wp2004-18a.pdf
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Bibliographic Info

Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2004-18.

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Length: 20 p.
Date of creation: Sep 2004
Date of revision:
Handle: RePEc:hit:hitcei:2004-18

Note: July, 2004
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Keywords: Strategic complementarity; network externality; coordina-tion;

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References

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  7. In-Uck Park, 2003. "A Simple Inducement Scheme to Overcome Adoption Externalities," The Centre for Market and Public Organisation 03/085, Department of Economics, University of Bristol, UK.
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  10. Dasgupta, Amil, 2007. "Coordination and delay in global games," Journal of Economic Theory, Elsevier, vol. 134(1), pages 195-225, May.
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Citations

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Cited by:
  1. Alexei Parakhonyak & Nick Vikander, 2013. "Optimal Sales Schemes for Network Goods," Discussion Papers 13-11, University of Copenhagen. Department of Economics.
  2. Steven A. Matthews, 2008. "Achievable Outcomes of Dynamic Contribution Games, Second Version," PIER Working Paper Archive 11-016, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 20 Jun 2011.
  3. Greaker, Mads & Midttømme, Kristoffer, 2013. "Optimal Environmental Policy with Network Effects: Is Lock-in in Dirty Technologies Possible?," Memorandum 15/2013, Oslo University, Department of Economics.
  4. Aoyagi, Masaki, 2013. "Coordinating adoption decisions under externalities and incomplete information," Games and Economic Behavior, Elsevier, vol. 77(1), pages 77-89.
  5. COLLA, Paolo & GARCIA, Filomena, 2004. "Technology adoption with forward looking agents," CORE Discussion Papers 2004041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Masaki Aoyagi, 2010. "Monopoly Sale of a Network Good," ISER Discussion Paper 0794, Institute of Social and Economic Research, Osaka University.
  7. Heggedal, Tom-Reiel & Helland, Leif, 2014. "Platform selection in the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 99(C), pages 168-177.
  8. Steven A. Matthews, 2006. "Smooth Monotone Contribution Games," PIER Working Paper Archive 06-018, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  9. Steven A. Matthews, 2008. "Achievable Outcomes in Smooth Dynamic Contribution Games," PIER Working Paper Archive 08-028, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  10. Gary Biglaiser & Jacques CreÌmer & AndreÌ Veiga, 2013. "Migration Between Platforms," Working Papers 13-18, NET Institute.
  11. Matthews, Steven A., 2013. "Achievable outcomes of dynamic contribution games," Theoretical Economics, Econometric Society, vol. 8(2), May.

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