Dynamic Formation of Network with Adoption Externalities
We analyze an entry game with multiple periods, in each period of which privately informed agents who have not joined yet decide whether to subscribe to a network, and subscribers derive benefits in future periods depending on the network size. We study the case that the agents are sufficiently patient and show that there exists a unique symmetric \e\ if the number of existing subscribers is common knowledge in each period, thereby resolving the coordination problem which is prevalent in markets with network externalities. Asymmetric \ea\ may exist, but we show that they, if exist, converge to the unique symmetric \e\ as the number of agents increases without bound
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