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Delay and information aggregation in stopping games with private information

Author

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  • Murto, Pauli
  • Välimäki, Juuso
Abstract
We consider equilibrium timing decisions in a model with a large number of players and informational externalities. The players have private information about a common payoff parameter that determines the optimal time to invest. They learn from each other in real time by observing past investment decisions. We develop new methods of analysis for such large games, and we give a full characterization of symmetric equilibria. We show that the equilibrium statistical inferences are based on an exponential learning model. Although the beliefs converge to truth, learning takes place too late. Ex-ante welfare is strictly between that without observational learning and that with full information.

Suggested Citation

  • Murto, Pauli & Välimäki, Juuso, 2013. "Delay and information aggregation in stopping games with private information," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2404-2435.
    • Handle: RePEc:eee:jetheo:v:148:y:2013:i:6:p:2404-2435
    DOI: 10.1016/j.jet.2013.07.022
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    References listed on IDEAS

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    Citations

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    Cited by:

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    2. Aghamolla, Cyrus & Hashimoto, Tadashi, 2020. "Information arrival, delay, and clustering in financial markets with dynamic freeriding," Journal of Financial Economics, Elsevier, vol. 138(1), pages 27-52.
    3. Marlats, Chantal & Ménager, Lucie, 2021. "Strategic observation with exponential bandits," Journal of Economic Theory, Elsevier, vol. 193(C).
    4. Osnat Zohar, 2019. "Boom-Bust Cycles of Learning, Investment and Disagreement," Bank of Israel Working Papers 2019.06, Bank of Israel.
    5. Wagner, Peter A., 2018. "Who goes first? Strategic delay under information asymmetry," Theoretical Economics, Econometric Society, vol. 13(1), January.
    6. Murto, Pauli & Välimäki, Juuso, 2015. "Large common value auctions with risk averse bidders," Games and Economic Behavior, Elsevier, vol. 91(C), pages 60-74.
    7. Ayse Gül Mermer & Sander Onderstal & Joep Sonnemans, "undated". "Can Communication Mitigate Strategic Delays in Investment Timing?," Tinbergen Institute Discussion Papers 23-033/I, Tinbergen Institute.
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    10. Wagner, Peter A. & Klein, Nicolas, 2022. "Strategic investment and learning with private information," Journal of Economic Theory, Elsevier, vol. 204(C).
    11. Leoni, Patrick & Lundtofte, Frederik, 2017. "Information, stochastic dominance and bidding: The case of Treasury auctions," Economics Letters, Elsevier, vol. 153(C), pages 80-82.
    12. Mitri Kitti, 2018. "Subgame Perfect Equilibria in Continuous-Time Repeated Games," Discussion Papers 120, Aboa Centre for Economics.
    13. Zhou, Beixi, 2024. "Dynamic coordination with payoff and informational externalities," Games and Economic Behavior, Elsevier, vol. 144(C), pages 141-166.
    14. Kirpalani, Rishabh & Madsen, Erik, 2023. "Strategic investment evaluation," Theoretical Economics, Econometric Society, vol. 18(3), July.
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    16. Alós-Ferrer, Carlos & Kern, Johannes, 2015. "Repeated games in continuous time as extensive form games," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 34-57.

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    More about this item

    Keywords

    Information aggregation; Observational learning; Dynamic games;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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