Strategic Delay in Global Games
The B.E. Journal of Theoretical Economics, 2016, vol. 16, issue 1, 83-117
We study strategic uncertainty in an investment coordination game when players have the option to delay acting. Absent the option to delay, the global games literature shows that efficient equilibrium outcomes are possible only when they are also risk dominant. In contrast, we show that when delay is not too costly, strategic uncertainty can encourage delay in such a way that efficient investment occurs whenever it is “worth waiting for.”
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