Strategic Delay and the Onset of Investment Cascades

Jianbo Zhang

RAND Journal of Economics, 1997, vol. 28, issue 1, 188-205

Abstract: I study the phenomenon of herd behavior in a framework where agents can endogenously choose both the actions and the timing of their actions. I assume that agents may have privately known quality and content of information. A unique symmetric equilibrium in pure strategies is proved to exist and characterized in its closed form. An investment cascade always occurs in the equilibrium, and a strategic delay is shown to exist before the sudden onset of the investment cascade. I also examine the loss of welfare from delay and information cascade

Date: 1997
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