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Ten isn’t large! Group size and coordination in a large-scale experiment

Jasmina Arifovic (), Cars Hommes (), Anita Kopányi-Peuker and Isabelle Salle ()
Authors registered in the RePEc Author Service: Anita Kopányi-Peuker ()

Staff Working Papers from Bank of Canada

Abstract: This paper provides experimental evidence on coordination within genuinely large groups that could proxy the atomistic nature of real-world markets and organizations. We use a bank-run game where the two pure-strategy equilibria “run†and “wait†can be ranked by payoff and risk-dominance and a random sequence of public announcements introduces stochastic sunspot equilibria. We find systematic group size differences that theory fails to predict. In the presence of strategic uncertainty, the behavior of small groups is uninformative of behavior in large groups: in contrast to groups of 10, large groups only coordinate on the safest but Pareto-inferior “run†strategy and never coordinate on sunspots. Our results entail a series of theoretical and experimental implications.

Keywords: Financial markets; Financial stability (search for similar items in EconPapers)
JEL-codes: C92 D90 G20 (search for similar items in EconPapers)
Pages: 69 pages
Date: 2020-07
New Economics Papers: this item is included in nep-cdm, nep-exp, nep-gth and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:20-30

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