Efficient Coordination in Weakest-Link Games

Arno Riedl, Ingrid Rohde and Martin Strobel

No 6223, IZA Discussion Papers from Institute of Labor Economics (IZA)

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.

Keywords: neighborhood choice; minimum effort; weakest-link; efficient coordination; experiment (search for similar items in EconPapers)
JEL-codes: C72 C92 D02 D03 D85 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2011-12
New Economics Papers: this item is included in nep-evo, nep-exp, nep-gth and nep-hpe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Published - published in: Review of Economic Studies, 2016, 83 (2), 737-767

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Related works:
Journal Article: Efficient Coordination in Weakest-Link Games (2016)
Working Paper: Efficient Coordination in Weakest-Link Games (2011)
Working Paper: Efficient Coordination in Weakest-Link Games (2011)
Working Paper: Efficient coordination in weakest-link games (2011)
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