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Investment dynamics with common and private values

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Author Info
Levin, Dan
Peck, James

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Abstract

We study a dynamic investment game with two-dimensional signals, where each firm observes its continuously distributed idiosyncratic cost of investment and a discrete signal correlated with common investment returns. We demonstrate that the one-step property holds and provide an equilibrium existence/characterization result. "Reversals" are possible, where a large number of firms investing in a given round becomes bad news about investment returns. Welfare is compared to static and rigid-timing benchmarks, and computed for large economies.

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Publisher Info
Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 143 (2008)
Issue (Month): 1 (November)
Pages: 114-139
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Handle: RePEc:eee:jetheo:v:143:y:2008:i:1:p:114-139

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Web page: http://www.elsevier.com/locate/inca/622869

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Related research
Keywords: Endogenous timing Herding Reversal Multi-dimensional signals;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Asen Ivanov & Dan Levin & James Peck, 2008. "Study of a Small-Market Investment Game with Common and Private Values," Working Papers 0801, VCU School of Business, Department of Economics. [Downloadable!]
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