Discoordination and miscoordination caused by sunspots in the laboratory

Jan Siebert and Guanzhong Yang

No 114/2017, Working Papers on East Asian Studies from University of Duisburg-Essen, Institute of East Asian Studies IN-EAST

Abstract: This paper combines two strands of the experimental sunspot literature. It extends the rare literature that focuses experimentally on the coordination problems caused by sunspot variables. It also extends the literature that focuses on coordination games that have a payoff-dominant and a divergent risk-dominant equilibrium. To achieve this, we use a repeated three-player stag hunt game with fixed groups. In our experiment, a sunspot variable points randomly at the risk-dominant or the payoff-dominant choice. We find out-of-equilibrium behavior (discoordination) caused by the sunspot variable in the short run. In the long run, the sunspot variable can lead to coordination of the payoff-dominated equilibrium (miscoordination). If the sunspot-generating process points more frequently to the risk-dominant choice, some groups converge to the sunspot equilibrium.

Keywords: sunspot; coordination (search for similar items in EconPapers)
JEL-codes: C72 C92 D81 E40 J52 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:udedao:1142017

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