A mechanism overcoming coordination failure based on gradualism and endogeneity

Yoshio Kamijo, Hiroki Ozono and Kazumi Shimizu
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Hiroki Ozono: Kagoshima University
Kazumi Shimizu: Waseda University

No SDES-2015-11, Working Papers from Kochi University of Technology, School of Economics and Management

Abstract: We examine three tools that can enhance coordination success in a repeated multiple-choice coordination game. Gradualism means that the game starts as an easy coordination problem and moves gradually to a more difficult one. The Endogenous Ascending mechanism implies that a gradual increase in the upper bound of coordination occurs only if coordination with the Pareto superior equilibrium in a stage game is attained. The Endogenous Descending mechanism requires that when the game's participants fail to coordinate, the level of the next coordination game be adjusted such that the game becomes simpler. We show that gradualism may not always work, but in such instances, its effect can be reinforced by endogeneity. Our laboratory experiment provides evidence that a mechanism that combines three tools, herein termed the ``Gradualism with Endogenous Ascending and Descending (GEAD)'' mechanism, works well. We discuss how the GEAD mechanism can be applied to real-life situations that suffer from coordination failure.

Keywords: Coordination Failure; Minimum Effort Game; Laboratory Experiment; Target Adjustment; Gradualism; Endogenous Ascending; Endogenous Descending (search for similar items in EconPapers)
JEL-codes: C72 C91 C92 M54 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2015-01, Revised 2015-01
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth and nep-mfd
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published in SDE Series, January 2015, pages 1-25

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Persistent link: https://EconPapers.repec.org/RePEc:kch:wpaper:sdes-2015-11

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