Wait or act now? Learning dynamics in stopping games

Mehmet Ekmekci () and Lucas Maestri

Journal of Economic Theory, 2022, vol. 205, issue C

Abstract: A principal chooses when to terminate her relationship with an agent in a dynamic environment. The agent's type is his private information, and his actions are observed with noise. Both players are long-lived. We characterize the equilibrium payoffs and behavior of patient players by establishing an equivalence of equilibrium outcomes to the unique Nash equilibrium of a simple one-shot signaling game. A patient agent reveals virtually all information that influences the principal at the beginning of the game. Hence, reputation is rapidly built. Despite eliciting some information, the principal does not benefit from it.

Keywords: Dynamic games; Reputation dynamics; Imperfect monitoring (search for similar items in EconPapers)
JEL-codes: C72 C73 D82 D86 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:205:y:2022:i:c:s0022053122001314

DOI: 10.1016/j.jet.2022.105541

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