Intertemporal coordination with delay options

Strategic Delay in Global Games

“…Araujo and Guimaraes (2015) investigate delay in an overlapping generations setting where current agents undertake a costly investment to benefit the older generation in the expectation that the next generation will reward them in similar fashion. The cost of that investment follows a random walk, and a current agent can choose when to invest, leading to a threshold rule in which agents delay investing until the cost is cheap enough.…”

A dynamic model of quality competition with endogenous prices

“…4 The fact that time, and more speci…cally competition over time, can be a source of ine¢ cient equilibria is well known in di¤erent contexts; for instance,Cellini and Lambertini (1998) show that accumulation of capital over time could be a source of ine¢ cient market allocation in a di¤erential game framework. Again,Araujo and Guimaraes (2015) show that time can be a source of ine¢ ciency in an oligopoly market for the presence of delay options.…”

“…In these industries, prices tend to be regulated in some countries and unregulated in others. 1 There are several issues that are relevant for the question of whether prices should be regulated or not. One important issue is how free pricing will a¤ect quality provision, and whether competition along both dimensions (price and quality) will lead to a socially optimal quality provision or not.…”

“…De…ne g := k 2 and s := +1 2 . We can re-write the system more succinctly as:where y := 6 s 2 + , and where the condition y > 2g ensures that these parameters (and therefore the possible solutions) are real.…”