Investment Cycles, Strategic Delay, and Self-Reversing Cascades∗
نویسندگان
چکیده
We study investment cycles and information flows in a model of social learning in which investment returns fluctuate according to a Markov process. In our Waiting Game, agents observe the investment history and a private signal correlated with the current period’s investment return. Agents then decide whether to invest in round 1 or to delay their decision to round 2 of the current period. Cascades in which everyone invests and no one invests eventually correct themselves. As compared to the No-Waiting Game with no opportunity for delay, the Waiting Game has shorter investment cascades, longer recessions, and shorter booms. The Waiting Game also has more underinvestment and less overinvestment.
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متن کاملInvestment Cycles, Strategic Delay, and Self-Reversing Cascades Web Appendix
Characterization of multiple equilibria In general, the WG will have multiple equilibria, as in Chamley (2004). There is now the possibility of a new regime in which all type-1 agents invest in round 1 and type-0 agents mix in round 1. We call this Regime 2M, which is a sort of “reverse” to Regime M. Let p be the probability that a type-0 agent invests in round 1, and V0(μ0, p) be the expected ...
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