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Overcoming the Coordination Problem: Dynamic Formation of Networks

Listed author(s):
  • Ochs, Jack
  • Park, In-Uck

We analyze an entry game with multiple periods. In each period privately informed agents who have not yet joined decide whether to subscribe to a network. Subscribers derive benefits in future periods depending on the network size. We study the case where agents are sufficiently patient and show that there exists a unique symmetric equilibrium if the number of existing subscribers is common knowledge in each period. This resolves the coordination problem which is prevalent in markets with network externalities.

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File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/13905/1/wp2004-18a.pdf
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Paper provided by Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University in its series CEI Working Paper Series with number 2004-18.

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Length: 20 p.
Date of creation: Sep 2004
Handle: RePEc:hit:hitcei:2004-18
Note: July, 2004
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