Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129808
Authors: 
Dong, Lu
Montero, Maria
Possajennikov, Alex
Year of Publication: 
2015
Series/Report no.: 
CeDEx Discussion Paper Series 2015-17
Abstract: 
Using experimental methods, this paper investigates the limits of communication and leadership in aiding group coordination in a minimum effort game. Choosing the highest effort is the payoff dominant Nash equilibrium in this game, and communication and leadership are expected to help in coordinating on such an equilibrium. We consider an environment in which the benefits of coordination are low compared to the cost of mis-coordination. In this environment, players converge to the most inefficient equilibrium in the absence of a leader. We look at two types of leaders: a cheap-talk leader-communicator who suggests an effort level but is free to choose a different level from the one suggested, and a first-mover leader whose choice of effort is observed by the rest of the group. We study whether leadership can prevent coordination failure and whether leadership allows coordination on a higher effort after a history of coordination failure. We find that in this tough environment both types of leadership are insufficient to escape from the low-effort equilibrium but leadership has some (limited) ability to prevent coordination failure. With the help of the strategy method for the followers' responses we find that the main reason for the persistence of coordination failure in this environment is the presence of followers who do not follow (or would not have followed) the leader.
Subjects: 
minimum effort game
coordination failure
communication
leadership
JEL: 
C72
C92
D23
Document Type: 
Working Paper

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