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Strategic Delay in Global Games

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  • Larson Nathan

    (Department of Economics, American University, Washington, DC, USA)

Abstract

We study strategic uncertainty in an investment coordination game when players have the option to delay acting. Absent the option to delay, the global games literature shows that efficient equilibrium outcomes are possible only when they are also risk dominant. In contrast, we show that when delay is not too costly, strategic uncertainty can encourage delay in such a way that efficient investment occurs whenever it is “worth waiting for.”

Suggested Citation

  • Larson Nathan, 2016. "Strategic Delay in Global Games," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 16(1), pages 83-117, January.
    • Handle: RePEc:bpj:bejtec:v:16:y:2016:i:1:p:83-117:n:6
    DOI: 10.1515/bejte-2014-0062
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    References listed on IDEAS

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    1. Kováč, Eugen & Steiner, Jakub, 2013. "Reversibility in dynamic coordination problems," Games and Economic Behavior, Elsevier, vol. 77(1), pages 298-320.
    2. Steiner, Jakub, 2008. "Coordination cycles," Games and Economic Behavior, Elsevier, vol. 63(1), pages 308-327, May.
    3. Dasgupta, Amil & Steiner, Jakub & Stewart, Colin, 2012. "Dynamic coordination with individual learning," Games and Economic Behavior, Elsevier, vol. 74(1), pages 83-101.
    4. Araujo, Luis & Guimaraes, Bernardo, 2015. "Intertemporal coordination with delay options," Journal of Economic Theory, Elsevier, vol. 157(C), pages 793-810.
    Full references (including those not matched with items on IDEAS)

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