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Dynamic coordination with network externalites: procrastination can be efficient

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  • Angeli, Deivis

Abstract

I analyze a dynamic coordination model under quasi-hyperbolic discounting. The main result is that present bias can induce a society to coordinate efficiently. When considering a transition from network A to B, higher present bias induces individuals to ask for higher relative quality of B, which is also what the central planner dictates, but for different reasons. A present biased agent overvalues relative quality because, when considering whether to initiate a transition, her momentary loss of network externalities is overvalued by myopic discounting. The planner’s motives are the negative externalities inflicted on agents 'stuck' in A during a transition.

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  • Angeli, Deivis, 2018. "Dynamic coordination with network externalites: procrastination can be efficient," Textos para discussão 481, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    • Handle: RePEc:fgv:eesptd:481
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    Cited by:

    1. Bernardo Guimaraes & Gabriel Jardanovski, 2022. "Who matters in dynamic coordination problems?," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(3), pages 452-469, June.
    2. Bernardo Guimaraes & Caio Machado & Ana E. Pereira, 2020. "Dynamic coordination with timing frictions: Theory and applications," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 656-697, June.

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