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American Economic Review: Vol. 102 No. 7 (December 2012)

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Who Matters in Coordination Problems?

Article Citation

Sákovics, József, and Jakub Steiner. 2012. "Who Matters in Coordination Problems?" American Economic Review, 102(7): 3439-61.

DOI: 10.1257/aer.102.7.3439

Abstract

Agents face a coordination problem akin to the adoption of a network technology. A principal announces investment subsidies that, at minimal cost, attain a given likelihood of successful coordination. Optimal subsidies target agents who impose high externalities on others and on whom others impose low externalities. Based on the analysis of the role of strategic uncertainty in coordination processes, we provide a methodology that can be used to find the optimal targets for a variety of interventions in a large class of coordination problems with heterogeneous agents. (JEL D81, D82, D83, O33)

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Authors

Sákovics, József (U Edinburgh)
Steiner, Jakub (CERGE-EI, Prague and Northwestern U)

JEL Classifications

D81: Criteria for Decision-Making under Risk and Uncertainty
D82: Asymmetric and Private Information; Mechanism Design
D83: Search; Learning; Information and Knowledge; Communication; Belief
O33: Technological Change: Choices and Consequences; Diffusion Processes


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