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Title:Coordination Failure Caused by Sunspots PDF Logo
Authors:Roos, Michael W. M.
Beugnot, Julie
Gürgüç, Zeynep
Øvlisen, Frederik R.
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Experimental Game Theory F13-V2
Abstract:In a coordination game with Pareto-ranked equilibria, we study whether a sunspot can lead to either coordination on an inferior equilibrium (mis-coordination) or to out-of equilibrium behavior (dis-coordination). While much of the literature searches for mechanisms to attain coordination on the efficient equilibrium, we consider sunspots as a potential reason for coordination failure. We conduct an experiment with a three player 2x2x2 game in which coordination on the efficient equilibrium is easy and should normally occur. In the control session, we find almost perfect coordination on the payoff-dominant equilibrium, but in the sunspot treatment, dis-coordination is frequent. Sunspots lead to significant inefficiency, and we conclude that sunspots can indeed cause coordination failure.
Subjects:sunspots
coordination
multiple Pareto-ranked equilibria
experiment
JEL:C92
C72
D81
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

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