DP16341 Collective Progress: Dynamics of Exit Waves

Author(s): Doruk Cetemen, Can Urgun, Leeat Yariv
Publication Date: July 2021
Keyword(s): collective action, Exit Waves, Optimal stopping, Retrospective Search
JEL(s): C73, D81, D83, O35
Programme Areas: Industrial Organization, Organizational Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16341

We study a model of collective search by teams. Discoveries beget discoveries and correlated search results are governed by a Brownian path. Search results' variation at any point---the search scope---is jointly controlled. Agents individually choose when to cease search and implement their best discovery. We characterize equilibrium and optimal policies. Search scope is constant and independent of search outcomes as long as no member leaves. It declines after departures. A simple drawdown stopping boundary governs each agent's search termination. We show the emergence of endogenous exit waves, whereby possibly heterogeneous agents cease search all at once.