Discontinuous and Continuous Stochastic Choice and Coordination in the Lab

Maxim Goryunov and Alexandros Rigos

No 2020:17, Working Papers from Lund University, Department of Economics

Abstract: We experimentally test theoretical predictions on equilibrium selection in a two-player coordination (investment) game. Through a minimal visual variation, our design prompts participants to play strategies whereby investing probability is either continuous or discontinuous in the payoff-relevant state. When participants use continuous strategies, average behavior is consistent with play in the risk-dominant equilibrium, the unique theoretical prediction. When they use discontinuous strategies, average behavior is closer to the payoff-dominant equilibrium strategy. In this case, the theory predicts multiple equilibria, for which we find no support. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies.

Keywords: Coordination; Global games; Information acquisition; Continuous stochastic choice; Laboratory experiment; Perception (search for similar items in EconPapers)
JEL-codes: C72 C92 D83 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-08-31, Revised 2022-06-15
New Economics Papers: this item is included in nep-cdm, nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Discontinuous and continuous stochastic choice and coordination in the lab (2022)
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