Overcoming the Coordination Problem: Dynamic Formation of Networks
|Speaker:||In-Uck Park, University of Bristol|
|Date:||Friday 5 November 2004|
|Location:||Lecture Room D, Streatham Court|
(with Jack Ochs)
We analyze an entry game with multiple periods. In each period privately informed agents who have not yet joined decide whether to subscribe to a network. Subscribers derive benefits in future periods depending on the network size. We study the case where agents are sufficiently patient and show that there exists a unique symmetric equilibrium if the number of existing subscribers is common knowledge in each period. This resolves the coordination problem which is prevalent in markets with network externalities.