An Experimental Study of Costly Coordination

Charles Holt and Jacob Goeree

Virginia Economics Online Papers from University of Virginia, Department of Economics

Abstract: This paper reports data for coordination game experiments with random matching. The experimental design is based on changes in an effort-cost parameter, which do not alter the set of Nash equilibria, nor do they alter the predictions of dynamic adjustment theories based on imitation or best responses to others' decisions. As would be expected, however, increases in effort cost result in reduced effort levels. Average behavior in the final periods is consistent with a one-parameter stochastic generalization of the Nash equilibrium that is calculated by maximizing a "stochastic potential function." The noise parameter estimated from the initial two-person, minimum-effort games is used to predict behavior in subsequent experiments with three-person games, using both minimum and medium-effort payoff structures.

Keywords: coordination games; laboratory experiments; stochastic potential; logit equilibrium; bounded rationality; minimum effort game; median effort game (search for similar items in EconPapers)
JEL-codes: C72 C92 (search for similar items in EconPapers)
Pages: 30 pages
New Economics Papers: this item is included in nep-cdm, nep-exp, nep-gth and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (88)

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Related works:
Journal Article: An experimental study of costly coordination (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:vir:virpap:326

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