Coordination failure caused by sunspots

Julie Beugnot (), Zeynep Gürgüç, Frederik Øvlisen () and Michael Roos ()
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Frederik Øvlisen: University of Copenhagen

Economics Bulletin, 2012, vol. 32, issue 4, 2860-2869

Abstract: In a coordination game with Pareto-ranked equilibria, we study whether a sunspot can lead to either coordination on an inferior equilibrium (mis-coordination) or to out-of equilibrium behavior (dis-coordination). While much of the literature searches for mechanisms to attain coordination on the efficient equilibrium, we consider sunspots as a potential reason for coordination failure. We conduct an experiment with a three player 2x2x2 game in which coordination on the efficient equilibrium is easy and should normally occur. In the control session, we find almost perfect coordination on the payoff-dominant equilibrium, but in the sunspot treatment, dis-coordination is frequent. Sunspots lead to significant inefficiency, and we conclude that sunspots can indeed cause coordination failure.

Keywords: sunspots; coordination game; multiple Pareto-ranked equilibria; experiment (search for similar items in EconPapers)
JEL-codes: C7 C9 (search for similar items in EconPapers)
Date: 2012-10-13
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Citations: View citations in EconPapers (11)

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