Friends or Strangers? Strategic Uncertainty and Coordination across Experimental Games of Strategic Complements and Substitutes

Gabriele Chierchia, Fabio Tufano and Giorgio Coricelli
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Gabriele Chierchia: Center for Mind/Brain Science, University of Trento, and Max Planck Institute for Human Cognitive and Brain Sciences
Giorgio Coricelli: Center for Mind/Brain Science, University of Trento, and Department of Economics, University of Southern California

No 2018-01, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: It is commonly assumed that friendship should generally benefit agents' ability to tacitly coordinate with others. However, this has never been tested on two 'opposite poles' of coordination, namely, games of strategic complements and substitutes. We present an experimental study in which participants interact with either a friend or a stranger in two classic games: the stag hunt game, which exhibits strategic complementarity, and the entry game, which exhibits strategic substitutability. Both games capture a frequent trade-off between a potentially high paying but uncertain action and a lower paying but safe alternative. We find that, relative to strangers, friends exhibit a propensity towards uncertainty in the stag hunt game, but an aversion to uncertainty in the entry game. Friends also "tremble" less than strangers, coordinate better and earn more in the stag hunt game but these advantages are largely decreased, and almost entirely lost in the entry game. Friendship thus appears to have a very different impact on coordination games involving strategic complements and substitutes. We further investigate the role of interpersonal similarities and friendship qualities in this differential impact.

Keywords: coordination; entry game; friendship; strategic complementarity; strategic substitutability; stag hunt game; strategic uncertainty (search for similar items in EconPapers)
Date: 2018-01
New Economics Papers: this item is included in nep-cbe, nep-exp, nep-gth and nep-hpe
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