Waiting for My Neighbors

48 Pages Posted: 13 Apr 2018

See all articles by Sidartha Gordon

Sidartha Gordon

Sciences Po, Department of Economics; University Paris-Dauphine

Emeric Henry

Sciences Po

Pauli Murto

Helsinki School of Economics & Business Administration

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Date Written: March 30, 2018

Abstract

We introduce a neighborhood structure in waiting games where the players decide when to "stop" (exit a market, adopt a technology). The payoff of stopping increases each time a neighbor stops. We show that the dynamic evolution of the network starkly depends on initial parameters and can take the form of either a shrinking network, where players at the edges stop first, or a fragmenting network where interior players stop first making the network split up in smaller ones over time. We find that, in addition to the coordination inefficiency standard in waiting games, the neighbourhood structure gives rise to two other inefficiencies, the first linked to the order of exit and the second to the final distribution of remaining nodes. We consider subsidy programs aimed at correcting these inefficiencies.

Keywords: waiting games, networks, inefficiencies

JEL Classification: D85, C73, D83

Suggested Citation

Gordon, Sidartha and Henry, Emeric and Murto, Pauli, Waiting for My Neighbors (March 30, 2018). Available at SSRN: https://ssrn.com/abstract=3152909 or http://dx.doi.org/10.2139/ssrn.3152909

Sidartha Gordon

Sciences Po, Department of Economics ( email )

28, rue des Saints peres
Paris, 75007
France

University Paris-Dauphine ( email )

Place du Marechal de Lattre Tassigny
Paris
France

Emeric Henry (Contact Author)

Sciences Po ( email )

27 rue Saint-Guillaume
Paris Cedex 07, 75337
France

Pauli Murto

Helsinki School of Economics & Business Administration ( email )

P.O. Box 21210
Helsinki 00100, 00101
Finland

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