Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/241196 
Year of Publication: 
2020
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2020-30
Publisher: 
Bank of Canada, Ottawa
Abstract: 
This paper provides experimental evidence on coordination within genuinely large groups that could proxy the atomistic nature of real-world markets and organizations. We use a bank-run game where the two pure-strategy equilibria "run" and "wait" can be ranked by payoff and risk-dominance and a random sequence of public announcements introduces stochastic sunspot equilibria. We find systematic group size differences that theory fails to predict. In the presence of strategic uncertainty, the behavior of small groups is uninformative of behavior in large groups: in contrast to groups of 10, large groups only coordinate on the safest but Pareto-inferior "run" strategy and never coordinate on sunspots. Our results entail a series of theoretical and experimental implications.
Subjects: 
Financial stability
Financial markets
JEL: 
C92
D83
D90
G20
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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