This paper introduces a dynamic coordination game with incomplete information defined by a state variable that evolves stochastically. Incomplete information enables us to use iterated dominance argument in order to resolve the indeterminacy issues. The key endogenous variable is the belief that...

This paper proposes a theory of endogenous fluctuations, grounded on a repeated game with strategic complementarity under incomplete information. The equilibrium is characterized by a persistent regime of high activity, where aggregate output tends to expand, followed by a persistent...