Dynamic coordination with individual learning

We study coordination in dynamic global games with private learning. Players choose whether and when to invest irreversibly in a project whose success depends on its quality and the timing of investment. Players gradually learn about project quality. We identify conditions on temporal incentives under which, in sufficiently long games, players coordinate on investing whenever doing so is not dominated. Roughly speaking, this outcome occurs whenever players’ payoffs are sufficiently tolerant of non-simultaneous coordination. We also identify conditions under which players coordinate on the risk-dominant action. We provide foundations for these results in terms of higher order beliefs. ∗We thank Martin Cripps, Jeff Ely, Philippe Jehiel, John Moore, Stephen Morris, Emre Ozdenoren, Alessandro Pavan, Eran Shmaya, Ian Stewart, Muhamet Yildiz, and several anonymous referees for helpful comments. We are also grateful for comments from seminar participants at Bonn, Edinburgh, LSE, UCL, the 2007 Workshop on Global Games at Stony Brook, the ESEM 2007 in Budapest, Games 2008 in Evanston, and the ASSA 2008 in New Orleans. †[email protected] ‡[email protected] §[email protected]