Conferences at Department of Economics, University of Toronto, Canadian Economic Theory Conference 2016

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To Joint or Not to Join: The Role of Information Structures in a Threshold Game

Bo Chen*, Rajat Deb

Date: 2016-05-07 2:30 pm – 3:00 pm
Last modified: 2016-05-01

Abstract


We analyze a binary-action sequential game with a tipping point in the presence of imperfect information. An information structure summarizes what each agent can observe before making her decision. Focusing on information structures where only "aggregate information" from past history can be observed, we fully characterize information structures that can lead to various (efficient and inefficient) Nash equilibria. When individual decision making can be rationalized using a process of iterative dominance (Moulin (1979)), we derive a necessary and sufficient condition on the information structure under which one obtains a unique and efficient Nash equilibrium outcome. Our results suggest that if sufficient (and not necessarily perfect) information is available, coordination failure can be overcome without centralized intervention.


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