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Reversibility in dynamic coordination problems


Kováč, Eugen; Steiner, Jakub (2013). Reversibility in dynamic coordination problems. Games and Economic Behavior, 77(1):298-320.

Abstract

We study a dynamic coordination process in which agents are uncertain about the actions of their fellow agents, and anticipate strategically relevant information. Because of the uncertainty and learning, (ir)reversibility of actions has important strategic consequences. We find that the reversibility option can either enhance or hamper efficient coordination, and we characterize the direction of the effect based solely on simple features of the coordination problem. The analysis is based on the following generalization of the Laplacian property known from static global games: agents at the beginning of the dynamic game act as if they were entirely uninformed about the aggregate play of fellow agents in each stage of the coordination process.

Abstract

We study a dynamic coordination process in which agents are uncertain about the actions of their fellow agents, and anticipate strategically relevant information. Because of the uncertainty and learning, (ir)reversibility of actions has important strategic consequences. We find that the reversibility option can either enhance or hamper efficient coordination, and we characterize the direction of the effect based solely on simple features of the coordination problem. The analysis is based on the following generalization of the Laplacian property known from static global games: agents at the beginning of the dynamic game act as if they were entirely uninformed about the aggregate play of fellow agents in each stage of the coordination process.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Economics and econometrics, finance, delay, exit, global games, Laplacian belief, learning, option, reversibility
Language:English
Date:1 January 2013
Deposited On:24 Sep 2019 09:01
Last Modified:25 Sep 2019 00:47
Publisher:Elsevier
ISSN:0899-8256
OA Status:Green
Publisher DOI:https://doi.org/10.1016/j.geb.2012.10.014

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