Investment dynamics with common and private values

Dan Levin () and James Peck

Journal of Economic Theory, 2008, vol. 143, issue 1, 114-139

Abstract: We study a dynamic investment game with two-dimensional signals, where each firm observes its continuously distributed idiosyncratic cost of investment and a discrete signal correlated with common investment returns. We demonstrate that the one-step property holds and provide an equilibrium existence/characterization result. "Reversals" are possible, where a large number of firms investing in a given round becomes bad news about investment returns. Welfare is compared to static and rigid-timing benchmarks, and computed for large economies.

Keywords: Endogenous; timing; Herding; Reversal; Multi-dimensional; signals (search for similar items in EconPapers)
Date: 2008
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Citations: View citations in EconPapers (16)

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Working Paper: Investment Dynamics with Common and Private Values (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:143:y:2008:i:1:p:114-139

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