Coordination with Cognitive Noise

Salvatore Nunnari and Cary Frydman

No 16644, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We experimentally study how cognitive noise affects behavior in coordination games. When players face small computational errors in valuation, equilibrium play becomes more predictable owing to the disappearance of multiple equilibria. Our experimental data provide novel evidence for this prediction: the frequency of coordination depends systematically on (i) public information and (ii) the distribution from which public information is drawn. We estimate that cognitive noise constitutes roughly half of the observed noise in strategic behavior. The errors that we model are distinct from those in previous behavioral game theory models and give rise to novel predictions that our data support.

Keywords: Complexity; Context-Dependence; Stochastic Choice; Cognitive Imprecision (search for similar items in EconPapers)
JEL-codes: C72 C92 D91 E71 (search for similar items in EconPapers)
Date: 2021-10
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Working Paper: Coordination with Cognitive Noise (2021)
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