When are Nash equilibria self-enforcing? An experimental analysis

Ken Clark, Stephen Kay and Martin Sefton
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Stephen Kay: School of Economic Studies, Faculty of Economic and Social Studies, Dover Street, University of Manchester, Manchester M13 9PL.
Martin Sefton: School of Economic Studies, Faculty of Economic and Social Studies, Dover Street, University of Manchester, Manchester M13 9PL.

International Journal of Game Theory, 2001, vol. 29, issue 4, 495-515

Abstract: We investigate the effect of non-binding pre-play communication in experiments with simple two-player coordination games. We reproduce the results of other studies in which play converges to a Pareto-dominated equilibrium in the absence of communication, and communication moves outcomes in the direction of the Pareto-dominant equilibrium. However, we provide new results which show that the effectiveness of communication is sensitive to the structure of payoffs. Our results support an argument put forward by Aumann: agreements to play a Nash equilibrium are fragile when players have a strict preference over their opponent's strategy choice. We also find that informative communication does not necessarily lead to the Pareto-dominant equilibrium.

Date: 2001-05-04
Note: Received: January 1997/Revised version: February 1997
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Working Paper: When Are Nash Equilibria Self Enforcing ? An Experimental Analysis (1997)
Working Paper: When Are Nash Equilibria Self-Enforcing? An Experimental Analysis (1997)
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