Learning Options in Coordination Problems

Jakub Steiner and Eugen Kovac

No 848, 2008 Meeting Papers from Society for Economic Dynamics

Abstract: We study intertemporal tradeoffs of players who fear a potential crisis in an environment with strategic complementarities. Such players may wish to delay their investment decisions in order to gather additional information. Drawing on the global game framework, we characterize the effects of the learning option on the coordination outcome. The option can either enhance or hamper efficient coordination, and we are able to determine which effect arises based only on qualitative but not quantitative features of the payoff functions. This allows to draw normative conclusions for the provision of the option.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed008:848

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