Observing each other’s observations in a Bayesian coordination game

Dominik Grafenhofer and Wolfgang Kuhle

Journal of Mathematical Economics, 2016, vol. 67, issue C, 10-17

Abstract: We study a Bayesian coordination game where agents receive private information on the game’s payoff structure. In addition, agents receive private signals that inform them of each other’s private information. We show, that once agents possess these different types of information, there exists a coordination game in the evaluation of this information. Even though the precisions of both signal types are exogenous, the precision with which agents forecast each other’s actions in equilibrium turns out to be endogenous. As a consequence, there exist multiple equilibria which differ with regard to the way that agents weight their private information to forecast each other’s actions.

Keywords: Coordination games; Equilibrium selection; Primary signals; Secondary signals (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:67:y:2016:i:c:p:10-17

DOI: 10.1016/j.jmateco.2016.08.004

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