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Title: Waiting for my neighbors

Author(s): Sidartha Gordon, Emeric Henry and Pauli Murto

Publication Date: March 2018

Keyword(s): inefficiencies, networks and waiting games

Programme Area(s): Industrial Organization

Abstract: We introduce a neighborhood structure in waiting games where the players decide when to``stop" (exit a market, adopt a technology). The payoff of stopping increases each time a neighbor stops. We show that the dynamic evolution of the network starkly depends on initial parameters and can take the form of either a shrinking network, where players at the edges stop first, or a fragmenting network where interior players stop first making the network split up in smaller ones over time. We find that, in addition to the coordination inefficiency standard in waiting games, the neighbourhood structure gives rise to two other inefficiencies, the first linked to the order of exit and the second to the final distribution of remaining nodes. We consider subsidy programs aimed at correcting these inefficiencies.

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Bibliographic Reference

Gordon, S, Henry, E and Murto, P. 2018. 'Waiting for my neighbors'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12834