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Overcoming the Coordination Problem: Dynamic Formation of Networks

  • 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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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
Date of revision:
Handle: RePEc:hit:hitcei:2004-18
Note: July, 2004
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  1. Simon, Leo K. & Stinchcombe, Maxwell B., 1987. "Extensive From Games in Continuous Time: Pure Strategies," Department of Economics, Working Paper Series qt03x115sh, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
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  14. Dasgupta, Amil, 2007. "Coordination and delay in global games," Journal of Economic Theory, Elsevier, vol. 134(1), pages 195-225, May.
  15. Andreas Park & Lones Smith, 2006. "Caller Number Five: Timing Games that Morph from One Form to Another," Cowles Foundation Discussion Papers 1554, Cowles Foundation for Research in Economics, Yale University.
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  19. repec:bla:restud:v:58:y:1991:i:2:p:259-76 is not listed on IDEAS
  20. Dybvig, Philip H. & Spatt, Chester S., 1983. "Adoption externalities as public goods," Journal of Public Economics, Elsevier, vol. 20(2), pages 231-247, March.
  21. Avinash Dixit, 2003. "Clubs with Entrapment," American Economic Review, American Economic Association, vol. 93(5), pages 1824-1829, December.
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