Heterogeneous Focal Points, Fairness, and Coordination

Raúl López-Pérez

No 2007/14, Working Papers in Economic Theory from Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History)

Abstract: In games with multiple equilibria, the fairest equilibrium –in case one exists- may be the obvious solution for some players but not for others, and players can be aware of this heterogeneity. This paper theoretically explores how coordination could be achieved in this case. The model is consistent with abundant experimental evidence and explains, for instance, why (a) the attractiveness of the fair equilibrium, (b) out-of-equilibrium payoffs, (c) dominated strategies, and (d) the number of players and available strategies matter for coordination. The model is compared with alternative equilibrium selection criteria like risk and payoff dominance and ideas for new experiments are suggested.

Keywords: Coordination; Equilibrium Refinement; Fairness; Focal Points; Heterogeneity (search for similar items in EconPapers)
JEL-codes: C72 D02 D62 D64 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2007-11
New Economics Papers: this item is included in nep-gth
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