Inequality in minimum-effort coordination

Christoph Feldhaus, Bettina Rockenbach and Christopher Zeppenfeld

Journal of Economic Behavior & Organization, 2020, vol. 177, issue C, 341-370

Abstract: Successful coordination is key for economic and societal wealth. The rich literature on the minimum-effort game (MEG) has provided valuable insights into coordination, both theoretically and empirically. Yet, although real-world scenarios often involve asymmetric benefits and/or costs from coordination, most previous studies rely on symmetric MEGs. We investigate the effect of unequal equilibrium payoffs in the MEG. In two experiments, we observe that players are better able to coordinate on an equal rather than an unequal Pareto-dominant equilibrium. We find that the ability to coordinate on the unequal Pareto-dominant equilibrium critically hinges on the costs of miscoordination for the player who benefits most from successful coordination: when her costs are low, she seems able to stabilize the Pareto-dominant equilibrium even if payoffs are highly unequal, whereas coordination success worsens substantially when her costs are high.

Keywords: Minimum-effort game; Coordination; Social comparison; Potential games; Lab experiment (search for similar items in EconPapers)
JEL-codes: C72 C92 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:177:y:2020:i:c:p:341-370

DOI: 10.1016/j.jebo.2020.05.009

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