Local discouragement and global collapse: A theory of coordination avalanches


Journal Article

We study a dynamic game in which all players initially possess the same information and coordinate on a high level of activity. Eventually, players with a long string of bad experiences become inactive. This prospect can cause a coordination avalanche in which all activity in the population stops. Coordination avalanches are part of Pareto-efficient equilibria; they can occur at any point in the game; their occurrence does not depend on the true state of nature; and allowing players to exchange information may merely hasten their onset. We present applications to search markets, organizational meltdown, and inefficient computer upgrades.

Full Text

Duke Authors

Cited Authors

  • Jeitschko, TD; Taylor, CR

Published Date

  • January 1, 2001

Published In

Volume / Issue

  • 91 / 1

Start / End Page

  • 208 - 224

International Standard Serial Number (ISSN)

  • 0002-8282

Digital Object Identifier (DOI)

  • 10.1257/aer.91.1.208

Citation Source

  • Scopus