 Noisy Equilibrium Selection in Coordination GamesMattias Ganslandt () and Hans Carlsson No 485, Working Paper Series from Research Institute of Industrial Economics Abstract: We analyse symmetric coordination games à la Bryant (1983) where a number of players simultaneously choose efforts from a compact interval and the lowest effort determines the output of a public good. Assuming that payoffs are concave in the public good and linear in effort, this game has a continuum of Pareto-ranked equilibria. In a noicy variant of the model an error term is added to each player's choice before his effort is determined. An equilibrium of the original model is noise-proof if it can be approximated by equilibria of noisy games with vanishing noise. There is a unique noise-proof equilibrium and, as the noisy games are supermodular, this solution can be derived by an iterated dominance argument. Our results agree with the experimental findings in Van Huyck, Battalio and Beil (1990). We also show that the unperturbed game is a potential game and that the noise-proof equilibrium maximizes the potential. Keywords: Equilibrium selection; Coordination; Strategic uncertainty; Noise proofness; Potential (search for similar items in EconPapers) Published in Economics Letters , 1998, pages 12. There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0485 Access Statistics for this paper More papers in Working Paper Series from Research Institute of Industrial Economics Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden. Contact information at EDIRC. |
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