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Ten Isn't Large! Group Size and Coordination in a Large-Scale Experiment

Jasmina Arifovic, Cars Hommes, Anita Kopányi-Peuker and Isabelle Salle

American Economic Journal: Microeconomics, 2023, vol. 15, issue 1, 580-617

Abstract: We provide experimental evidence on coordination within large groups that could proxy the atomistic nature of real-world markets. We use a bank run game where the two pure-strategy equilibria can be ranked by payoff and risk dominance and a sequence of public announcements introduces stochastic sunspot equilibria. We find systematic group size effects that theory fails to predict. When the payoff-dominant strategy is risky enough, the behavior of small groups is uninformative of the behavior in large groups: unlike smaller groups of size ten, larger groups exclusively coordinate on the Pareto-inferior strategy and never coordinate on sunspots.

JEL-codes: C92 D83 D91 G21 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1257/mic.20200290

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Handle: RePEc:aea:aejmic:v:15:y:2023:i:1:p:580-617