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Efficient Dynamic Coordination with Individual Learning

Author

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  • Amil Dasgupta
  • Jakub Steiner

    ()

  • Colin Stewart

Abstract

We study how the presence of multiple participation opportunities coupled with individual learning about payoff affects the ability of agents to coordinate efficiently in global coordination games. Two players face the option to invest irreversibly in a project in one of many rounds. The project succeeds if some underlying state variable theta is positive and both players invest, possibly asynchronously. In each round they receive informative private signals about theta, and asymptotically learn the true value of theta. Players choose in each period whether to invest or to wait for more precise information about theta. We show that with sufficiently many rounds, both players invest with arbitrarily high probability whenever investment is socially efficient, and delays in investment disappear when signals are precise. This result stands in sharp contrast to the usual static global game outcome in which players coordinate on the risk-dominant action. We provide a foundation for these results in terms of higher order beliefs.

Suggested Citation

  • Amil Dasgupta & Jakub Steiner & Colin Stewart, 2007. "Efficient Dynamic Coordination with Individual Learning," ESE Discussion Papers 175, Edinburgh School of Economics, University of Edinburgh.
  • Handle: RePEc:edn:esedps:175
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    Cited by:

    1. Sylvain Chassang & Gerard PadrĂ³ I Miquel, 2010. "Conflict and Deterrence Under Strategic Risk," The Quarterly Journal of Economics, Oxford University Press, vol. 125(4), pages 1821-1858.
    2. repec:pit:wpaper:376 is not listed on IDEAS

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    JEL classification:

    • J1 - Labor and Demographic Economics - - Demographic Economics

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