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Intertemporal coordination with delay options

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  • Araujo, Luis
  • Guimaraes, Bernardo

Abstract

This paper studies equilibrium selection in intertemporal coordination problems with delay options. The risk-dominant action of the underlying one-shot game is selected when frictions are arbitrarily small. Larger frictions introduce real option effects in the model and inhibit coordination.

Suggested Citation

  • Araujo, Luis & Guimaraes, Bernardo, 2015. "Intertemporal coordination with delay options," Journal of Economic Theory, Elsevier, vol. 157(C), pages 793-810.
  • Handle: RePEc:eee:jetheo:v:157:y:2015:i:c:p:793-810
    DOI: 10.1016/j.jet.2015.02.008
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    References listed on IDEAS

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    Cited by:

    1. Cellini, Roberto & Siciliani, Luigi & Straume, Odd Rune, 2018. "A dynamic model of quality competition with endogenous prices," Journal of Economic Dynamics and Control, Elsevier, vol. 94(C), pages 190-206.
    2. George-Marios Angeletos & Chen Lian, 2016. "Incomplete Information in Macroeconomics: Accommodating Frictions in Coordination," NBER Working Papers 22297, National Bureau of Economic Research, Inc.
    3. Larson Nathan, 2016. "Strategic Delay in Global Games," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(1), pages 83-117, January.
    4. repec:nip:nipewp:08/2015 is not listed on IDEAS

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    More about this item

    Keywords

    Intertemporal; Coordination; Delay options; Overlapping generations;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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