Who matters in dynamic coordination problems?
Bernardo Guimaraes and
Journal of Public Economic Theory, 2022, vol. 24, issue 3, 452-469
This paper studies a dynamic coordination model with timing frictions and heterogeneity in several dimensions. Each agent might affect and be affected by others in different ways, and the frequency of their decisions might differ. We show there is a unique equilibrium in the model. The economy might sometimes be stuck in an inefficient low‐output equilibrium, and subsidies can improve welfare. We solve the planner's problem assuming no financial constraint and full commitment. The optimal subsidy does not depend on each type's timing frictions: at each point in time, the planner should simply compensate each agent for its externality on others at that particular moment—and disregard the potential for generating externalities in the future. This seemingly myopic policy provides the right incentives for forward‐looking agents. One key intuition is that players form expectations about what others will do exactly as the planner forms expectations about the actions of its future selves.
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: Who matters in dynamic coordination problems? (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bla:jpbect:v:24:y:2022:i:3:p:452-469
Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1097-3923
Access Statistics for this article
Journal of Public Economic Theory is currently edited by Rabah Amir, Gareth Myles and Myrna Wooders
More articles in Journal of Public Economic Theory from Association for Public Economic Theory Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().