CLUSTERING IN N-PLAYER PREEMPTION GAMES

Rossella Argenziano and Philipp Schmidt-Dengler

Journal of the European Economic Association, 2014, vol. 12, issue 2, 368-396

Abstract: We study a complete information preemption game in continuous time. A finite number of firms decide when to make an irreversible, observable investment. Upon investment, a firm receives flow profits, which decrease in the number of firms that have invested. The cost of investment declines over time exogenously. We characterize the subgame-perfect equilibrium outcome, which is unique up to a permutation of players. When the preemption race among late investors is sufficiently intense, the preemption incentive for earlier investors disappears, and two or more investments occur at the same time. We identify a sufficient condition in terms of model parameters: clustering of investments occurs if the flow profits from consecutive investments are sufficiently close. This shows how clustering can occur in the absence of coordination failures, informational spillovers, or positive payoff externalities.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (21)

Downloads: (external link)
http://hdl.handle.net/10.1111/jeea.12054 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Clustering in N-Player Preemption Games (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jeurec:v:12:y:2014:i:2:p:368-396

Access Statistics for this article

Journal of the European Economic Association is currently edited by Fabrizio Zilibotti, Dirk Bergemann, Nicola Gennaioli, Claudio Michelacci and Daniele Paserman

More articles in Journal of the European Economic Association from European Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().