Journal article
Breakdowns
- Abstract:
- We study a continuous‐time game of strategic experimentation in which the players try to assess the failure rate of some new equipment or technology. Breakdowns occur at the jump times of a Poisson process whose unknown intensity is either high or low. In marked contrast to existing models, we find that the cooperative value function does not exhibit smooth pasting at the efficient cutoff belief. This finding extends to the boundaries between continuation and stopping regions in Markov perfect equilibria. We characterize the unique symmetric equilibrium, construct a class of asymmetric equilibria, and elucidate the impact of bad versus good Poisson news on equilibrium outcomes.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
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- Files:
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(Preview, pdf, 359.2KB, Terms of use)
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- Publisher copy:
- 10.3982/te1670
Authors
- Publisher:
- John Wiley and Sons, Ltd.
- Journal:
- Theoretical Economics More from this journal
- Volume:
- 10
- Issue:
- 1
- Pages:
- 175-202
- Publication date:
- 2015-02-03
- Acceptance date:
- 2014-03-24
- DOI:
- EISSN:
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1933-6837
- ISSN:
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1555-7561
- Language:
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English
- Keywords:
- Pubs id:
-
pubs:930537
- UUID:
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uuid:56bed3e3-8ea8-40ba-8b2e-b8b3daaf3edd
- Local pid:
-
pubs:930537
- Deposit date:
-
2019-02-27
- ARK identifier:
Terms of use
- Copyright holder:
- Godfrey Keller and Sven Rady
- Copyright date:
- 2015
- Notes:
-
© 2015 Godfrey Keller and Sven Rady
This is an open access article under the terms of the Creative Commons Attribution‐NonCommercial License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited and is not used for commercial purposes.
- Licence:
- CC Attribution (CC BY)
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