Coordination and sophistication

Larbi Alaoui (), Katharina A. Janezic and Antonio Penta
Additional contact information
Larbi Alaoui: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3637071

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: How coordination can be achieved in isolated, one-shot interactions without communication and in the absence of focal points is a long-standing question in game theory. We show that a cost-benefit approach to reasoning in strategic settings delivers sharp theoretical predictions that address this central question. In particular, our model predicts that, for a large class of individual reasoning processes, coordination in some canonical games is more likely to arise when players perceive heterogeneity in their cognitive abilities, rather than homogeneity. In addition, and perhaps contrary to common perception, it is not necessarily the case that being of higher cognitive sophistication is beneficial to the agent: in some coordination games, the opposite is true. We show that subjects' behavior in a laboratory experiment is consistent with the predictions of this model, and reject alternative coordination mechanisms. Overall, the empirical results strongly support our model.

Keywords: Coordination; cognitive cost; sophistication; strategic reasoning; value of reasoning (search for similar items in EconPapers)
JEL-codes: C72 C91 C92 D80 (search for similar items in EconPapers)
Date: 2022-11
New Economics Papers: this item is included in nep-exp and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econ-papers.upf.edu/papers/1849.pdf Whole Paper (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1849

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).