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Tractable dynamic global games and applications
- 1.0420864 - NHU-C 2014 RIV US eng J - Journal Article
Mathevet, L. - Steiner, Jakub
Tractable dynamic global games and applications.
Journal of Economic Theory. Roč. 148, č. 6 (2013), s. 2583-2619. ISSN 0022-0531. E-ISSN 1095-7235
R&D Projects: GA ČR(CZ) GA13-34759S
Grant - others:UK(CZ) UNCE 204005/2012
Institutional support: PRVOUK-P23
Keywords : global games * dynamic game * coordination
Subject RIV: AH - Economics
Impact factor: 0.919, year: 2013
We present a family of tractable dynamic global games and its applications. Agents privately learn about a fixed fundamental, and repeatedly adjust their investments while facing frictions. The game exhibits many externalities: payoffs may depend on the volume of investment, on its volatility, and on its concentration. The solution is driven by an invariance result: aggregate investment is (in a pivotal contingency) invariant to a large family of frictions. We use the invariance result to examine how frictions, including those similar to the Tobin tax, affect equilibrium. We identify conditions under which frictions discourage harmful behavior without compromising investment volume.
Permanent Link: http://hdl.handle.net/11104/0227443
Number of the records: 1