Abstract

http://ssrn.com/abstract=155649
 
 

References (16)



 
 

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Local Discouragement and Global Collapse - A Theory of Information Avalanches


Thomas D. Jeitschko


Michigan State University - Department of Economics

Curtis R. Taylor


Duke University - Department of Economics

March 1999


Abstract:     
We study a dynamic coordination game with incomplete information in which players may either be active or inactive. All players initially possess the same information and begin by coordinating on a high level of activity. As the game progresses, agents have different experiences and update accordingly. At some point, agents with a sufficiently long string of bad experiences will decide that the game isn't worth playing and will become inactive. This prospect can cause a total spontaneous collapse of activity in the population at large through a phenomenon we call an information avalanche.

By definition, when an information avalanche occurs, it is part of a Pareto efficient equilibrium and, therefore, does not rely on sun spots or other exogenous coordinating mechanisms. We show that an information avalanche can occur at any point in the game, that its occurrence does not depend on the true state of nature, and that allowing players to exchange information may merely hasten the onset of an avalanche.

Number of Pages in PDF File: 30

JEL Classification: D83

working papers series


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Date posted: April 14, 1999  

Suggested Citation

Jeitschko, Thomas D. and Taylor, Curtis R., Local Discouragement and Global Collapse - A Theory of Information Avalanches (March 1999). Available at SSRN: http://ssrn.com/abstract=155649 or http://dx.doi.org/10.2139/ssrn.155649

Contact Information

Thomas D. Jeitschko (Contact Author)
Michigan State University - Department of Economics ( email )
110 Marshall-Adams Hall
East Lansing, MI 48824
United States
517-355-8302 (Phone)
517-432-1068 (Fax)
HOME PAGE: http://www.msu.edu/~jeitschk/
Curtis R. Taylor
Duke University - Department of Economics ( email )
Durham, NC 27708-0204
United States
919-660-1827 (Phone)
919-684-8974 (Fax)
Feedback to SSRN


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References:  16
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