On the Interplay of Informational Spillovers and Payoff Externalities

Posted: 22 Sep 2003

Abstract

Informational spillovers induce agents to outwait each other's actions in order to make more-informed decisions. If waiting is costly, we expect the best-informed agent, who has the least to learn from other agents' decisions, to take the first action. I study the interplay between informational spillovers and a direct payoff externality. I show that when the payoff externality is positive or relatively weak, the above intuition is validated. On the other hand, if the externality is negative and strong, the best-informed agent has the most to gain from outwaiting the other.

Suggested Citation

Frisell, Lars, On the Interplay of Informational Spillovers and Payoff Externalities. Available at SSRN: https://ssrn.com/abstract=429609

Lars Frisell (Contact Author)

Sveriges Riksbank ( email )

S-103 37 Stockholm
Sweden

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