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Equilibria in a dynamic global game: the role of cohort effects

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  • Paul Heidhues

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  • Nicolas Melissas

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Abstract

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

Suggested Citation

  • Paul Heidhues & Nicolas Melissas, 2006. "Equilibria in a dynamic global game: the role of cohort effects," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 28(3), pages 531-557, August.
    • Handle: RePEc:spr:joecth:v:28:y:2006:i:3:p:531-557
    DOI: 10.1007/s00199-005-0644-3
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    Cited by:

    1. Toxvaerd, Flavio, 2008. "Strategic merger waves: A theory of musical chairs," Journal of Economic Theory, Elsevier, vol. 140(1), pages 1-26, May.
    2. Barbieri, Stefano & Mattozzi, Andrea, 2009. "Membership in citizen groups," Games and Economic Behavior, Elsevier, vol. 67(1), pages 217-232, September.
    3. Kováč, Eugen & Steiner, Jakub, 2013. "Reversibility in dynamic coordination problems," Games and Economic Behavior, Elsevier, vol. 77(1), pages 298-320.
    4. Ochs, Jack & Park, In-Uck, 2010. "Overcoming the coordination problem: Dynamic formation of networks," Journal of Economic Theory, Elsevier, vol. 145(2), pages 689-720, March.
    5. George-Marios Angeletos & Alessandro Pavan, 2007. "Dynamic Global Games of Regime Change: Learning, Multiplicity and Timing of Attacks," Discussion Papers 1497, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    6. Amil Dasgupta & Jakub Steiner & Colin Stewart, 2007. "Efficient Dynamic Coordination with Individual Learning," Working Papers tecipa-301, University of Toronto, Department of Economics.
    7. Garth Heutel & Erich Muehlegger, 2015. "Consumer Learning and Hybrid Vehicle Adoption," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(1), pages 125-161, September.
    8. Jakub Steiner & Eugen Kovac, 2008. "Learning Options in Coordination Problems," 2008 Meeting Papers 848, Society for Economic Dynamics.
    9. Hikmet Gunay, 2008. "The role of externalities and information aggregation in market collapse," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 35(2), pages 367-379, May.
    10. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2004. "Information Dynamics and Equilibrium Multiplicity in Global Games of Regime Change," NBER Working Papers 11017, National Bureau of Economic Research, Inc.
    11. Christian Hellwig, 2004. "Dynamic Global Games of Regime Change: Learning, Multiplicity and Timing of Attacks (August 2006, with George-Marios Angeletos and Alessandro Pavan)," UCLA Economics Online Papers 279, UCLA Department of Economics.
    12. Chong Huang, 2011. "Coordination and Social Learning," PIER Working Paper Archive 11-021, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    13. repec:eee:macchp:v2-1065 is not listed on IDEAS
    14. repec:eee:jetheo:v:171:y:2017:i:c:p:1-34 is not listed on IDEAS
    15. Xavier Vives, 2009. "Strategic complementarity in multi-stage games," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 40(1), pages 151-171, July.
    16. George-Marios Angeletos & Chen Lian, 2016. "Incomplete Information in Macroeconomics: Accommodating Frictions in Coordination," NBER Working Papers 22297, National Bureau of Economic Research, Inc.
    17. Hikmet Gunay, 2014. "Waiting for Signaling Quality," Southern Economic Journal, Southern Economic Association, vol. 81(2), pages 364-386, October.
    18. Dasgupta, Amil & Steiner, Jakub & Stewart, Colin, 2012. "Dynamic coordination with individual learning," Games and Economic Behavior, Elsevier, vol. 74(1), pages 83-101.
    19. Dasgupta, Amil, 2007. "Coordination and delay in global games," Journal of Economic Theory, Elsevier, vol. 134(1), pages 195-225, May.
    20. 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.
    21. Chong Huang, 2011. "Defending Against Speculative Attacks: Reputation, Learning, and Coordination," PIER Working Paper Archive 11-039, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.

    More about this item

    Keywords

    Global game; Strategic waiting; Coordination; Strategic complementarities; Period-specific network effects; Equilibrium selection.;

    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
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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