An experimental study of costly coordination |
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Authors: | Jacob K. Goeree Charles A. Holt |
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Affiliation: | aDivision of the Humanities and Social Sciences, California Institute of Technology, Mail code 228-77, Pasadena, CA 91125, USA;bDepartment of Economics, University of Virginia, P.O. Box 400182, Charlottesville, VA 22904-4182, USA |
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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 adjustment theories based on imitation or best response dynamics. As expected, however, increasing the effort cost lowers effort levels. Maximization of a stochastic potential function, a concept that generalizes risk dominance to continuous games, predicts this reduction in efforts. An error parameter estimated from initial two-person, minimum-effort games is used to predict behavior in other three-person coordination games. |
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Keywords: | Coordination games Stochastic potential Logit equilibrium Out-of-sample prediction |
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