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Reversibility in dynamic coordination problems

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  • Kováč, Eugen
  • Steiner, Jakub

Abstract

We study a dynamic coordination process in which agents are uncertain about the actions of their fellow agents, and anticipate strategically relevant information. Because of the uncertainty and learning, (ir)reversibility of actions has important strategic consequences. We find that the reversibility option can either enhance or hamper efficient coordination, and we characterize the direction of the effect based solely on simple features of the coordination problem. The analysis is based on the following generalization of the Laplacian property known from static global games: agents at the beginning of the dynamic game act as if they were entirely uninformed about the aggregate play of fellow agents in each stage of the coordination process.

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  • Kováč, Eugen & Steiner, Jakub, 2013. "Reversibility in dynamic coordination problems," Games and Economic Behavior, Elsevier, vol. 77(1), pages 298-320.
  • Handle: RePEc:eee:gamebe:v:77:y:2013:i:1:p:298-320
    DOI: 10.1016/j.geb.2012.10.014
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    Cited by:

    1. József Sákovics & Jakub Steiner, 2012. "Who Matters in Coordination Problems?," American Economic Review, American Economic Association, vol. 102(7), pages 3439-3461, December.
    2. Larson Nathan, 2016. "Strategic Delay in Global Games," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(1), pages 83-117, January.
    3. Araujo, Luis & Guimaraes, Bernardo, 2015. "Intertemporal coordination with delay options," Journal of Economic Theory, Elsevier, vol. 157(C), pages 793-810.
    4. Mathevet, Laurent & Steiner, Jakub, 2013. "Tractable dynamic global games and applications," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2583-2619.
    5. Enrico Perotti & Rafael Matta, 2015. "Insecure Debt," Tinbergen Institute Discussion Papers 15-035/IV/DSF88, Tinbergen Institute.
    6. Bernardo Guimaraes & Luis Araujo, 2012. "The effect of options on coordination," 2012 Meeting Papers 474, Society for Economic Dynamics.
    7. Kováč, Eugen & Steiner, Jakub, 2013. "Reversibility in dynamic coordination problems," Games and Economic Behavior, Elsevier, vol. 77(1), pages 298-320.
    8. Jakub Steiner & Laurent Mathevet, 2012. "Sand in the Wheels: A Dynamic Global-Game Approach," 2012 Meeting Papers 123, Society for Economic Dynamics.
    9. Brindisi, Francesco & Çelen, Boğaçhan & Hyndman, Kyle, 2014. "The effect of endogenous timing on coordination under asymmetric information: An experimental study," Games and Economic Behavior, Elsevier, vol. 86(C), pages 264-281.
    10. George-Marios Angeletos & Chen Lian, 2016. "Incomplete Information in Macroeconomics: Accommodating Frictions in Coordination," NBER Working Papers 22297, National Bureau of Economic Research, Inc.
    11. Bernardo Guimaraes & Caio Machado & Ana E. Pereira, 2020. "Dynamic coordination with timing frictions: Theory and applications," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 656-697, June.
    12. Angeletos, G.-M. & Lian, C., 2016. "Incomplete Information in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1065-1240, Elsevier.

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    More about this item

    Keywords

    Delay; Exit; Global games; Laplacian belief; Learning; Option; Reversibility;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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