Discontinuous and continuous stochastic choice and coordination in the lab

Maxim Goryunov and Alexandros Rigos

Journal of Economic Theory, 2022, vol. 206, issue C

Abstract: We experimentally test theoretical predictions on equilibrium selection in a two-player coordination (investment) game. Through a minimal visual variation, our design prompts participants to play strategies whereby investing probability is either continuous or discontinuous in the payoff-relevant state. When participants use continuous strategies, average behavior is consistent with play in the risk-dominant equilibrium, the unique theoretical prediction. When they use discontinuous strategies, average behavior is closer to the payoff-dominant equilibrium strategy. In this case, the theory predicts multiple equilibria, for which we find no support. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies.

Keywords: Coordination; Global games; Information acquisition; Continuous stochastic choice; Laboratory experiment; Perception (search for similar items in EconPapers)
JEL-codes: C72 C92 D83 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (1)

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Working Paper: Discontinuous and Continuous Stochastic Choice and Coordination in the Lab (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:206:y:2022:i:c:s0022053122001478

DOI: 10.1016/j.jet.2022.105557

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