Dynamic coordination among heterogeneous agents

Abstract

We study a dynamic model of coordination with timing frictions and payoff heterogeneity. There is a unique equilibrium, characterized by thresholds that determine the choices of each type of agent. We characterize equilibrium for the limiting cases of vanishing timing frictions and vanishing shocks to fundamentals. A lot of conformity emerges: despite payoff heterogeneity, agents' equilibrium thresholds partially coincide as long as there exists a set of beliefs that would make this coincidence possible-though they never fully coincide. In case of vanishing frictions, the economy behaves almost as if all agents were equal to an average type. Conformity is not inefficient. The efficient solution would have agents following others even more often and giving less importance to the fundamental.

Dynamic coordination with timing frictions: Theory and applications

“…The planner's problem when agents are ex ante heterogeneous can be solved in an analogous way to the one presented in Section 2.3. Guimaraes and Pereira (2017) show that the region of the state space where the planner would choose the same strategy for different types is always larger than the region where agents play the same strategy in the decentralized equilibrium. Therefore, from an efficiency perspective, there is not enough conformity.…”

“…Although our framework is slightly different from theirs, we can check if our game admits a uniquely absorbing equilibrium that is also globally accessible. 27 This equivalence also holds in cases with heterogeneous agents (see Guimaraes & Pereira, 2017). 28 Burdzy et al (2001) study the Matsui and Matsuyama (1995) model with shocks and obtain results similar to Frankel and Pauzner (2000).…”

“…However, owing to the assumption of a Poisson process for the arrival rate of switching opportunities, we can deal with this problem in a two-dimensional space. Guimaraes and Pereira (2017) show that for any given strategy profile, the dynamics of n t (i.e., ∂n t /∂t) depends on each n q,t (for ∈ q ) only through n t . Denote by t  the set of types whose strategies prescribe action 1 at time t. We have that…”

“…While strategic complementarities lead agents to try to do what others are expected to do, idiosyncratic components of preferences might push agents in different directions. Guimaraes and Pereira (2017) study the interplay of complementarities and heterogeneity in payoffs in a dynamic setting with timing frictions as in Frankel and Pauzner (2000).…”

Dynamic Coordination and the Optimal Stimulus Policies

“…He and Xiong () build a model of debt runs. Guimaraes and Pereira () analyse how payoff heterogeneity affects these models. Guimaraes and Pereira () study welfare in a model of network externalities.…”