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Bandwagon Investment Equilibrium of Investment Timing Games
The Engineering Economist ( IF 1.2 ) Pub Date : 2020-10-14 , DOI: 10.1080/0013791x.2020.1829222
Kihyung Kim 1 , Abhijit Deshmukh 2
Affiliation  

Abstract

Empirical research reports various behaviors exhibited by investors, including voluntary concurrent investments, which are called bandwagon investments. However, the current theoretical understanding is still limited in explaining under which condition the investment bandwagon effect occurs. We investigate the closed-loop subgame perfect equilibrium of an investment timing game that describes voluntary simultaneous investments. We show that investors are on the investment bandwagon when (1) they expand their current capacities and (2) the second mover’s additional profit rate exceeds a threshold value. Otherwise, investors invest sequentially. This result explains the frequently observed investment herd effect.



中文翻译:

投资时机博弈的潮流投资均衡

摘要

实证研究报告了投资者所表现出的各种行为,包括自愿性并行投资,也就是所谓的跟风投资。然而,目前的理论认识还不足以解释在何种条件下会发生投资潮流效应。我们研究了一个描述自愿同时投资的投资时机博弈的闭环子博弈完美均衡。我们表明,当 (1) 他们扩大现有能力和 (2) 后发者的额外利润率超过阈值时,投资者会加入投资潮流。否则,投资者将依次投资。这一结果解释了经常观察到的投资羊群效应。

更新日期:2020-10-14
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