RT Generic
T1 Equilibrium Selection through Incomplete Information in Coordination Games: An Experimental Study
A1 Cabrales, Antonio
A1 Nagel, Rosemarie
A1 Armenter, Roc
K1 Global games
K1 risk dominance
K1 equilibrium selection
K1 common knowledge
AB We perform an experiment on a pure coordination game with uncertainty about thepayoffs. 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 has a unique strategy profile thatsurvives 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. The behavior of the subjects converges to the theoretical prediction after enough experience has been gained. The data (and the comments) suggest that subjects do not apply through “a priori” reasoning the iterated deletion of dominated strategies.Instead, they adapt to the responses of other players. Thus, the length of the learning phase clearly varies for the different signals. We also test behavior in a game without uncertainty as abenchmark case. The game with uncertainty is inspired by the “global” games of Carlsson and Van Damme (1993).
PB Universidad Pompeu Fabra. Departamento de Economia y Empresa
YR 2002
FD 2002-02
LK https://hdl.handle.net/10016/3488
UL https://hdl.handle.net/10016/3488
LA eng
DS e-Archivo
RD 29 may. 2024