Efficient coordination in the lab

Aurora García-Gallego, Penélope Hernández-Rojas and Amalia Rodrigo-González
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Penélope Hernández-Rojas: University of Valencia
Amalia Rodrigo-González: University of Valencia

Journal of Economic Interaction and Coordination, 2019, vol. 14, issue 1, No 7, 175-201

Abstract: Abstract We follow the example of Gossner et al. (Econometrica 74(6):1603–1636, 2006) in the design of a finitely repeated 2-player coordination game with asymmetric information. Player 1 and Player 2 and Nature simultaneously decide whether to play 0 or 1 and successful coordination requires that all actions coincide. Nature’s moves are known only by Player 1, while Player 2 observes only the history of Nature and Player 1. In such a theoretical set up, efficient transmission of information takes place when Player 1 uses block codification through signalling mistakes. With this in mind, we test coordination in the lab. We first model and establish the appropriate sequence length played by Nature and the block strategy for lab implementability. We show that the majority rule with 3-length is the optimal block codification for a 55-length sequence. Experimental data supports the main results of the original model with respect to the codification rule using signalling mistakes.

Keywords: Coordination game; Experiment; Cheap-talk (search for similar items in EconPapers)
JEL-codes: C73 C91 D8 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1007/s11403-017-0214-3

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