Efficient Dynamic Coordination with Individual Learning

Amil Dasgupta, Jakub Steiner and Colin Stewart

Working Papers from University of Toronto, Department of Economics

Abstract: We study how the presence of multiple participation opportunities coupled with private learning about payoffs affects the ability of agents to coordinate efficiently in global coordination games. Two players face the option to invest irreversibly in a project in one of many rounds. The project succeeds if some underlying state variable q is positive and both players invest, possibly asynchronously. In each round they receive informative private signals about q, and asymptotically learn the true value of q. Players choose in each period whether to invest or to wait for more precise information about q. We show that with sufficiently many rounds, both players invest with arbitrarily high probability whenever investment is socially efficient. This result stands in sharp contrast to the usual static global game outcome in which players coordinate on the risk-dominant action. We provide a foundation for these results in terms of higher order beliefs.

Keywords: Coordination; global games; efficiency; dynamic games; higher-order beliefs (search for similar items in EconPapers)
JEL-codes: C72 C73 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2007-11-07
New Economics Papers: this item is included in nep-gth and nep-ppm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Efficient Dynamic Coordination with Individual Learning (2007)
Working Paper: Efficient dynamic coordination with individual learning (2007)
Working Paper: Efficient Dynamic Coordination with Individual Learning (2007)
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