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Equilibrium Selection Through Incomplete Information in Coordination Games: An Experimental Study

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dc.affiliation.dptoUC3M. Departamento de Economíaes
dc.contributor.authorCabrales, Antonio
dc.contributor.authorNagel, Rosemarie
dc.contributor.authorArmenter, Roc
dc.date.accessioned2009-03-04T13:33:08Z
dc.date.available2009-03-04T13:33:08Z
dc.date.issued2007
dc.description.abstractWe perform an experiment on a pure coordination game with uncertainty about the payoffs. Our game is closely related to models that have been used in many macroeconomic and financial applications to solve problems of equilibrium indeterminacy. In our experiment, each subject receives a noisy signal about the true payoffs. This game (inspired by the “global” games of Carlsson and van Damme, Econometrica, 61, 989–1018, 1993) has a unique strategy profile that survives the iterative deletion of strictly dominated strategies (thus a unique Nash equilibrium). The equilibrium outcome coincides, on average, with the risk-dominant equilibrium outcome of the underlying coordination game. In the baseline game, the behavior of the subjects converges to the theoretical prediction after enough experience has been gained. The data (and the comments) suggest that this behavior can be explained by learning. To test this hypothesis, we use a different game with incomplete information, related to a complete information game where learning and prior experiments suggest a different behavior. Indeed, in the second treatment, the behavior did not converge to equilibrium within 50 periods in some of the sessions.We also run both games under complete information. The results are sufficiently similar between complete and incomplete information to suggest that risk-dominance is also an important part of the explanation.
dc.description.statusPublicado
dc.format.mimetypetext/plain
dc.format.mimetypeapplication/pdf
dc.identifier.bibliographicCitationExperimental Economics, 2007, vol.10, p. 221-234
dc.identifier.doi10.1007/s10683-007-9183-z
dc.identifier.issn1573-6938
dc.identifier.urihttp://hdl.handle.net/10016/3472
dc.language.isoeng
dc.publisherSpringer
dc.relation.publisherversionhttp://www.springerlink.com/content/4131x7193u5r0712/fulltext.pdf
dc.relation.publisherversionhttp://dx.doi.org/10.1007/s10683-007-9183-z
dc.rights© Economic Science Association
dc.rights.accessRightsopen access
dc.subject.ecienciaEconomía
dc.subject.otherGlobal games
dc.subject.otherRisk dominance
dc.subject.otherEquilibrium selection
dc.subject.othercommon knowledge
dc.titleEquilibrium Selection Through Incomplete Information in Coordination Games: An Experimental Study
dc.typeresearch article*
dc.type.reviewPeerReviewed
dspace.entity.typePublication
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