Coordination and Delay in Global Games

What is the effect of offering agents an option to delay their choices in a global coordination game? We address this question by considering a canonical binary action global game, and allowing players to delay their irreversible decisions. Those that delay have access to accurate private information at the second stage, but receive lower payoffs. We show that, as noise vanishes, as long as the beneÞt to taking the risky action early is greater than the beneÞt of taking the risky action late, the introduction of the option to delay reduces the incidence of coordination failure in equilibrium relative to the standard case where all agents must choose their action at the same time. We outline the welfare implications of this Þnding, and probe the robustness of our results from a variety of angles. This paper is a revised version of a chapter from my PhD dissertation at Yale University. I am grateful to my advisor, Stephen Morris, and committee members Ben Polak and Dirk Bergemann for their guidance.