Coordination in a Mobile World
CERGE-EI Working Paper No. 295
40 Pages Posted: 18 Jun 2008
Date Written: April 1, 2006
We study coordination failures in many simultaneously occurring coordination problems called projects. Players encounter one of these projects, but have an outside option to search for another of the projects. Drawing on the global games approach, we show that such a mobile game has a unique equilibrium which allows us to examine comparative statics. The endogeneity of the outside option value and of the search activity leads to non-monotonicity of welfare with respect to search costs; high mobility may hurt players. Moreover, outcomes of the mobile game are remarkably robust to changes in the exogenous parameters. In contrast to the static benchmark global game without a search option, successful coordination is frequent in the mobile game even for extremely poor distributions of economic fundamentals, and coordination failures are common even for extremely good distributions. The strategic consequences of the search option are robust to various modifications of the model.
Keywords: Coordination, Equilibrium Uniqueness, Global Games, Search, Mobility,Globalization
JEL Classification: C72, D82, D83
Suggested Citation: Suggested Citation