Reversibility in Dynamic Coordination Problems

Eugen Kovac and Jakub Steiner

CERGE-EI Working Papers from The Center for Economic Research and Graduate Education - Economics Institute, Prague

Abstract: Agents at the beginning of a dynamic coordination process (1) are uncertain about actions of their fellow players and (2) anticipate receiving strategically relevant information later on in the process. In such environments, the (ir)reversibility of early actions plays an important role in the choice among them. We characterize the strategic e ects of the reversibility option on the coordination outcome. Such an option can either enhance or hamper ecient coordination, and we determine the direction of the effect based only on simple features of the coordination problem. The analysis is based on a generalization of the Laplacian property known from static global games: Players at the beginning of a dynamic game act as if they were entirely uninformed about aggregate play of fellow players in each stage of the coordination process.

Keywords: Delay; Exit; Global games; Laplacian belief; Learning; Option; Reversibility. (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
Date: 2008-11
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Reversibility in dynamic coordination problems (2013)
Working Paper: Reversibility in Dynamic Coordination Problems (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:cer:papers:wp374

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