When Does Communication Improve Coordination?

Tore Ellingsen and Robert Östling

American Economic Review, 2010, vol. 100, issue 4, 1695-1724

Abstract: We study costless pre-play communication of intentions among inexperienced players. Using the level-k model of strategic thinking to describe players' beliefs, we fully characterize the effects of preplay communication in symmetric 2x2 games. One-way communication weakly increases coordination on Nash equilibrium outcomes, although average payoffs sometimes decrease. Two-way communication further improves payoffs in some games but is detrimental in others. Moving beyond the class of symmetric 2x2 games, we find that communication facilitates coordination in common interest games with positive spillovers and strategic complementarities, but there are also games in which any type of communication hampers coordination. (JEL C72, D83)

JEL-codes: C72 D83 (search for similar items in EconPapers)
Date: 2010
Note: DOI: 10.1257/aer.100.4.1695
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Citations: View citations in EconPapers (87)

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