Equilibria in a Dynamic Global Game: The Role of Cohort Effects

Paul Heidhues () and Nicolas Melissas

No 4995, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We introduce strategic waiting in a global game setting with irreversible investment. Players can wait in order to make a better informed decision. We allow for cohort effects and discuss when they arise endogenously in technology adoption problems with positive contemporaneous network effects. Formally, cohort effects lead to intra-period network effects being greater than inter-period network effects. Depending on the nature of the cohort effects, the dynamic game may or may not satisfy dynamic increasing differences. If it does, our model has a unique rationalizable outcome. Otherwise, there exist parameter values for which multiple equilibria arise because players have a strong incentive to invest at the same point in time others do.

Keywords: Global game; Strategic waiting; Coordination; Strategic complementarities; Period-speciifc network effects; Equilibrium selection (search for similar items in EconPapers)
JEL-codes: C72 C73 D82 D83 (search for similar items in EconPapers)
Date: 2005-04
New Economics Papers: this item is included in nep-gth and nep-net
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Equilibria in a dynamic global game: the role of cohort effects (2006)
Working Paper: Equilibria in a Dynamic Global Game: The role of cohort effects (2003)
Working Paper: Equilibria in a Dynamic Global Game: The Role of Cohort Effects (2003)
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