Equilibria in a dynamic global game: the role of cohort effects
We introduce strategic waiting in a global game setting with irreversible investment. Players can wait in order to make a better informed decision. We allow for cohort effects, which arise endogenously in technology adoption problems with positive contemporaneous network effects. Formally, cohort effects lead to intra-period network effects being greater than inter-period network effects. Depending on the nature of the cohort effects, our game may or may not satisfy dynamic increasing differences. If it does, our model has a unique rationalizable outcome. Otherwise, multiple equilibria may exist as players want to invest at the same point in time others do. Copyright Springer-Verlag Berlin/Heidelberg 2006
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Volume (Year): 28 (2006)
Issue (Month): 3 (08)
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