On the Role of Non-equilibrium Focal Points as Coordination Devices

Antoni Bosch-Domènech () and Nicolaas J. Vriend ()
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Antoni Bosch-Domènech: http://www.econ.upf.edu/en/people/onefaculty.php?id=p177

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: Considering a pure coordination game with a large number of equivalent equilibria, we argue, first, that a focal point that is itself not a Nash equilibrium and is Pareto dominated by all Nash equilibria, may attract the players' choices. Second, we argue that such a non-equilibrium focal point may act as an equilibrium selection device that the players use to coordinate on a closely related small subset of Nash equilibria. We present theoretical as well as experimental support for these two new roles of focal points as coordination devices.

Keywords: Coordination game; Focal point; Nash equilibrium; Equilibrium selection; Coordination device; LeeX (search for similar items in EconPapers)
JEL-codes: C72 C91 (search for similar items in EconPapers)
Date: 2008-02
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Working Paper: On the Role of Non-equilibrium Focal Points as Coordination Devices (2008)
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