Local discouragement and global collapse: A theory of coordination avalanches
Abstract
We study a dynamic game in which all players initially possess the same information
and coordinate on a high level of activity. Eventually, players with a long string
of bad experiences become inactive. This prospect can cause a coordination avalanche
in which all activity in the population stops. Coordination avalanches are part of
Pareto-efficient equilibria; they can occur at any point in the game; their occurrence
does not depend on the true state of nature; and allowing players to exchange information
may merely hasten their onset. We present applications to search markets, organizational
meltdown, and inefficient computer upgrades.
Type
Journal articlePermalink
https://hdl.handle.net/10161/1715Collections
More Info
Show full item recordScholars@Duke
Curtis R. Taylor
Professor of Economics
Taylor's primary research interest is microeconomic theory with emphasis on the areas
of Industrial Organization, Political Economy, and the Theory of Contracts. He has
worked on a variety of topics such as: the optimal design of research contests, the
causes and timing of market crashes, and consumer privacy. Professor Taylor's research
has been supported by grants from the National
Science Foundation, the U.S. Department of Agriculture, and the Texas Higher Education
Coordinating Board, am
Articles written by Duke faculty are made available through the campus open access policy. For more information see: Duke Open Access Policy
Rights for Collection: Scholarly Articles
Works are deposited here by their authors, and represent their research and opinions, not that of Duke University. Some materials and descriptions may include offensive content. More info