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    Learning and payoff externalities in an investment game

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    Date Issued
    2020-01
    Publisher Version
    10.1016/j.geb.2019.11.006
    Author(s)
    Margaria, Chiara
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    Permanent Link
    https://hdl.handle.net/2144/40471
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    Accepted manuscript
    Citation (published version)
    Chiara Margaria. 2020. "Learning and payoff externalities in an investment game." Games and Economic Behavior, Volume 119, pp. 234 - 250. https://doi.org/10.1016/j.geb.2019.11.006
    Abstract
    This paper examines the interplay of informational and payoff externalities in a two-player irreversible investment game. Each player learns about the quality of his project by observing a private signal and the action of his opponent. I characterize the unique symmetric equilibrium in a timing game that features a second-mover advantage, allowing for arbitrary correlation in project qualities. Despite private learning, the game reduces to a stochastic war of attrition. In contrast to the case of purely informational externalities, all investments happen at the same real time instant—irrespective of the sign of the correlation—and beliefs never get trapped in a no-learning region, provided that the second-mover advantage is sufficiently high.
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    • CAS: Economics: Scholarly Papers [188]
    • BU Open Access Articles [3730]


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