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De-synchornized Clocks in Preemption Games with Risky Prospects

  • Barbos, Andrei

We study an optimal timing decision problem where an agent endowed with a risky investment opportunity trades the benefits of waiting for additional information against a potential loss in first-mover advantage. The players' clocks are de-synchronized in that they learn of the investment opportunity at different times. Previous literature has uncovered an inverted-U shaped relationship between a player's equilibrium expected expenditures and the measure of his competitors. This result no longer holds when the increase in the measure of players leads to a decrease in the degree of clock synchronization in the game. We show that the result reemerges if information arrives only at discrete times, and thus, a player's strategic beliefs are updated between decision times in a measurably meaningful way.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40846.

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Date of creation: 31 May 2012
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Handle: RePEc:pra:mprapa:40846
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  1. Andrei Barbos, 2015. "Information Acquisition and Innovation under Competitive Pressure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 24(2), pages 325-347, 06.
  2. Decamps, Jean-Paul & Mariotti, Thomas, 2004. "Investment timing and learning externalities," Journal of Economic Theory, Elsevier, vol. 118(1), pages 80-102, September.
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  4. Jonathon M. Clegg, 2016. "Perception vs Reality: How Does The British Electorate Evaluate Economic Performance of Incumbent Governments In The Post War Period?," Economics Series Working Papers 143, University of Oxford, Department of Economics.
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  8. Dilip Abreu & Markus K. Brunnermeier, 2002. "Bubbles and crashes," LSE Research Online Documents on Economics 24905, London School of Economics and Political Science, LSE Library.
  9. Drew Fudenberg & Jean Tirole, 1985. "Preemption and Rent Equalization in the Adoption of New Technology," Review of Economic Studies, Oxford University Press, vol. 52(3), pages 383-401.
  10. Morgan, John, 2004. "Clock Games: Theory and Experiments," Santa Cruz Department of Economics, Working Paper Series qt81m0r0jj, Department of Economics, UC Santa Cruz.
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  13. Sahuguet, Nicolas, 2006. "Volunteering for heterogeneous tasks," Games and Economic Behavior, Elsevier, vol. 56(2), pages 333-349, August.
  14. Helen Weeds, 2002. "Strategic Delay in a Real Options Model of R&D Competition," Review of Economic Studies, Oxford University Press, vol. 69(3), pages 729-747.
  15. Reinganum, Jennifer F., . "Dynamic Games of Innovation," Working Papers 287, California Institute of Technology, Division of the Humanities and Social Sciences.
  16. Abreu, Dilip & Brunnermeier, Markus K., 2002. "Synchronization risk and delayed arbitrage," Journal of Financial Economics, Elsevier, vol. 66(2-3), pages 341-360.
  17. Chamley, Christophe & Gale, Douglas, 1994. "Information Revelation and Strategic Delay in a Model of Investment," Econometrica, Econometric Society, vol. 62(5), pages 1065-85, September.
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  19. Patrick Bolton & Christopher Harris, 1999. "Strategic Experimentation," Econometrica, Econometric Society, vol. 67(2), pages 349-374, March.
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