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Efficient Dynamic Coordination with Individual Learning

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Author Info

  • Amil Dasgupta
  • Jakub Steiner
  • Colin Stewart

Abstract

We study how the presence of multiple participation opportunities coupled with private learning about payoffs affects the ability of agents to coordinate efficiently in global coordination games. Two players face the option to invest irreversibly in a project in one of many rounds. The project succeeds if some underlying state variable q is positive and both players invest, possibly asynchronously. In each round they receive informative private signals about q, and asymptotically learn the true value of q. Players choose in each period whether to invest or to wait for more precise information about q. We show that with sufficiently many rounds, both players invest with arbitrarily high probability whenever investment is socially efficient. This result stands in sharp contrast to the usual static global game outcome in which players coordinate on the risk-dominant action. We provide a foundation for these results in terms of higher order beliefs.

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Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-301.

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Length: 25 pages
Date of creation: 07 Nov 2007
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-301

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Related research

Keywords: Coordination; global games; efficiency; dynamic games; higher-order beliefs;

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References

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Cited by:
  1. John Duffy, 2009. "Equilibrium Selection in Static and Dynamic Entry Games," Working Papers 376, University of Pittsburgh, Department of Economics, revised Dec 2011.
  2. Sylvain Chassang & Gerard Padro i Miquel, 2008. "Conflict and Deterrence under Strategic Risk," NBER Working Papers 13964, National Bureau of Economic Research, Inc.

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