Unraveling Coordination Problems

Roweno J.R.K. Heijmans ()
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Roweno J.R.K. Heijmans: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway, https://www.nhh.no/en/employees/faculty/roweno-johannes-ryan-king-heijmans/

No 2023/20, Discussion Papers from Norwegian School of Economics, Department of Business and Management Science

Abstract: The interplay between strategic beliefs and policy complicates policy design in coordination games. To untangle this relationship, we study policy design in the context of equilibrium selection. We characterize the unique subsidy scheme that selects a targeted strategy vector as the unique equilibrium of a coordination game. These subsidies are continuous in model parameters and do not make the targeted strategies strictly dominant. While discrimination is optimal in games with multiple equilibria (Segal, 2003; Winter, 2004), we construct a non-discriminatory subsidy scheme the cost of which converges to that of a least-cost discriminatory policy when agents are symmetric.

Keywords: Coordination; global games; contracting with externalities; incentives in teams; networks; unique implementation (search for similar items in EconPapers)
JEL-codes: D81 D82 D83 D86 H20 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2023-11-09
New Economics Papers: this item is included in nep-gth and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:nhhfms:2023_020

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