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Wait or act now? Learning dynamics in stopping games

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  • Ekmekci, Mehmet
  • Maestri, Lucas

Abstract

A principal chooses when to terminate her relationship with an agent in a dynamic environment. The agent's type is his private information, and his actions are observed with noise. Both players are long-lived. We characterize the equilibrium payoffs and behavior of patient players by establishing an equivalence of equilibrium outcomes to the unique Nash equilibrium of a simple one-shot signaling game. A patient agent reveals virtually all information that influences the principal at the beginning of the game. Hence, reputation is rapidly built. Despite eliciting some information, the principal does not benefit from it.

Suggested Citation

  • Ekmekci, Mehmet & Maestri, Lucas, 2022. "Wait or act now? Learning dynamics in stopping games," Journal of Economic Theory, Elsevier, vol. 205(C).
    • Handle: RePEc:eee:jetheo:v:205:y:2022:i:c:s0022053122001314
    DOI: 10.1016/j.jet.2022.105541
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    References listed on IDEAS

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    More about this item

    Keywords

    Dynamic games; Reputation dynamics; Imperfect monitoring;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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