Learning and Hysteresis in a Dynamic Coordination Game
AbstractThis paper introduces a dynamic coordination game with incomplete information defined by a state variable that evolves stochastically. Incomplete information enables us to use iterated dominance argument in order to resolve the indeterminacy issues. The key endogenous variable is the belief that each agent holds about the state of the world. We show that as agents update their heterogeneous beliefs through learning sequentially, they adjust their beliefs to justify the status quo. This effect induces equilibrium actions that support the status quo, a property we call hysteresis.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 32992.
Date of creation: 01 Jan 2006
Date of revision: 17 Aug 2011
dynamic coordination game; hysteresis; global games;
Find related papers by JEL classification:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hans Carlsson & Eric van Damme, 1993.
"Global Games and Equilibrium Selection,"
Levine's Working Paper Archive
122247000000001088, David K. Levine.
- Carlsson, H. & Van Damme, E., 1990. "Global Games And Equilibrium Selection," Papers 9052, Tilburg - Center for Economic Research.
- Carlsson, H. & Damme, E.E.C. van, 1990. "Global games and equilibrium selection," Discussion Paper 1990-52, Tilburg University, Center for Economic Research.
- Carlsson, H. & Damme, E.E.C. van, 1993. "Global games and equilibrium selection," Open Access publications from Tilburg University urn:nbn:nl:ui:12-154416, Tilburg University.
- Caplin, Andrew & Leahy, John, 1994.
"Business as Usual, Market Crashes, and Wisdom after the Fact,"
American Economic Review,
American Economic Association, vol. 84(3), pages 548-65, June.
- Caplin, A. & Leahy, J., 1992. "Business as Usual, Market Crashes and Wisdom After the Fact," Discussion Papers 1992_18, Columbia University, Department of Economics.
- Caplin, A. & Leahy, J., 1992. "Business as Usual, Market Crashes, and Wisdom after the Fact," Harvard Institute of Economic Research Working Papers 1594, Harvard - Institute of Economic Research.
- Christophe Chamley, 1999. "Coordinating Regime Switches," The Quarterly Journal of Economics, MIT Press, vol. 114(3), pages 869-905, August.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht).
If references are entirely missing, you can add them using this form.