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  3. Dynamic Coordination with Timing Frictions: Theory and Applications


Documento de trabajo

Dynamic Coordination with Timing Frictions: Theory and Applications

  • person Caio Machado

    Bernardo Guimaraes; Ana Elisa Pereira

  • class Documento de Trabajo IE-PUC, N° 502, 2017

Abstract: We start by presenting the general model of dynamic coordination with timing frictions and some key theoretical results. We prove the model features a unique rationalizable equilibrium, present a method to solve the social planner problem and derive expressions for the equilibrium threshold in limiting cases. With this toolkit in hand, we get analytical results for a case with linear preferences and present several applications, ranging from network externalities to statistical discrimination and to macroeconomics. Besides generating insights for specific questions, the applications illustrate the potential of the model to accommodate a large set of economic problems. Last, we show extensions of the framework that allow for endogenous hazard rates, preemption motives and ex-ante heterogeneous agents.