RT Journal Article
T1 Equilibrium Selection Through Incomplete Information in Coordination Games: An Experimental Study
A1 Cabrales, Antonio
A1 Nagel, Rosemarie
A1 Armenter, Roc
AB We 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 subjectsconverges 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, relatedto a complete information game where learning and prior experiments suggest a differentbehavior. 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 theexplanation.
PB Springer
SN 1573-6938
YR 2007
FD 2007
LK http://hdl.handle.net/10016/3472
UL http://hdl.handle.net/10016/3472
LA eng
DS e-Archivo
RD 30 abr. 2024