Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/58893
Authors: 
Riedl, Arno
Rohde, Ingrid M. T.
Strobel, Martin
Year of Publication: 
2011
Series/Report no.: 
Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6223
Abstract: 
Existing experimental research on behavior in weakest-link games shows overwhelmingly the inability of people to coordinate on the efficient equilibrium, especially in larger groups. We hypothesize that people are able to coordinate on efficient outcomes, provided they have sufficient freedom to choose their interaction neighborhood. We conduct experiments with medium sized and large groups and show that neighborhood choice indeed leads to coordination on the fully efficient equilibrium, irrespective if group size. This leads to substantial welfare effects. Achieved welfare is between 40 and 60 percent higher in games with neighborhood choice than without neighborhood choice. We identify exclusion as the simple but very effective mechanism underlying this result. In early rounds, high performers exclude low performers who in consequence 'learn' to become high performers.
Subjects: 
efficient coordination
weakest-link
minimum effort
neighborhood choice
experiment
JEL: 
C72
C92
D02
D03
D85
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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