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Overcoming the Coordination Problem: Dynamic Formation of Networks

  • Jack Ochs
  • In-Uck Park

We analyze a multi-period entry game among privately informed agents who differ with respect to the number of agents who must enter in order for their own entry to be profitable. In each period agents who have not yet joined decide whether to subscribe to a network. There exists a unique equilibrium that approximates any symmetric equilibrium arbitrarily closely as the discount factor approaches one. This resolves the coordination problem. Ex-post efficiency is necessarily achieved asymptotically as the population size grows large. These results do not hold if subscribers can reverse their decisions without cost.

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Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 172782000000000046.

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Date of creation: 28 Mar 2005
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Handle: RePEc:cla:levrem:172782000000000046
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