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The effect of options on coordination

Author

Listed:
  • Bernardo Guimaraes

    (Sao Paulo School of Economics - FGV)

  • Luis Araujo

    (Michigan State University)

Abstract

In some coordination problems, an agent's payoff depends on what other agents will do in the future. This paper studies how constraints on the timing of actions affect equilbrium in those problems. While the possibility of waiting longer for others' actions helps agents to coordinate in the good equilibrium, the option of delaying one's actions harms coordination. In a symmetric case, the risk-dominant equilibrium of the corresponding one-shot game is selected.

Suggested Citation

  • Bernardo Guimaraes & Luis Araujo, 2012. "The effect of options on coordination," 2012 Meeting Papers 474, Society for Economic Dynamics.
    • Handle: RePEc:red:sed012:474
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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