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The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information

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Author Info
Frank Heinemann
Rosemarie Nagel
Peter Ockenfels

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Abstract

The theory of global games has shown that coordination games with multiple equilibria may have a unique equilibrium if certain parameters of the payoff function are private information instead of common knowledge. We report the results of an experiment designed to test the predictions of this theory. Comparing sessions with common and private information, we observe only small differences in behavior. For common information, subjects coordinate on threshold strategies that deviate from the global game solution towards the payoff-dominant equilibrium. For private information, thresholds are closer to the global game solution than for common information. Variations in the payoff function affect behavior as predicted by comparative statics of the global game solution. Predictability of coordination points is about the same for both information conditions. Copyright The Econometric Society 2004.

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File URL: http://hdl.handle.net/10.1111/j.1468-0262.2004.00544.x
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Publisher Info
Article provided by Econometric Society in its journal Econometrica.

Volume (Year): 72 (2004)
Issue (Month): 5 (09)
Pages: 1583-1599
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Handle: RePEc:ecm:emetrp:v:72:y:2004:i:5:p:1583-1599

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  1. Alan Beggs, 2005. "Learning in Bayesian Games with Binary Actions," Economics Series Working Papers 232, University of Oxford, Department of Economics. [Downloadable!]
  2. Jakub Steiner, 2006. "Coordination of Mobile Labor," ESE Discussion Papers 152, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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  3. John Duffy & Dean Corbae, 2006. "Experiments with Network Formation," Working Papers 292, University of Pittsburgh, Department of Economics, revised Aug 2007. [Downloadable!]
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  4. Alexander Elbittar & Rodrigo Harrison & Roberto Muñoz, 2007. "Network Structure in a Link-formation Game: An Experimental Study," Levine's Working Paper Archive 122247000000001708, UCLA Department of Economics. [Downloadable!]
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  5. Sääskilahti, Pekka, 2006. "Buying Decision Coordination and Monopoly Pricing of Network Goods," MPRA Paper 5106, University Library of Munich, Germany. [Downloadable!]
  6. Camille Cornand & Frank Heinemann, 2004. "Optimal Degree of Public Information Dissemination," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
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  7. Arun Sundararajan, 2008. "Local Network Effects and Complex Network Structure," Contributions to Theoretical Economics, Berkeley Electronic Press, vol. 7(1), pages 1319-1319. [Downloadable!] (restricted)
  8. Giovanna Devetag & Andreas Ortmann, 2006. "When and Why? A Critical Survey on Coordination Failure in the Laboratory," CEEL Working Papers 0605, Computable and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia. [Downloadable!]
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  9. Zekeriya Eser & Joe Peek, 2006. "Reciprocity and Network Coordination: Evidence from Japanese Banks," Hi-Stat Discussion Paper Series d05-157, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  10. Jakub Steiner & Colin Stewart, 2006. "Contagion through Learning," ESE Discussion Papers 151, Edinburgh School of Economics, University of Edinburgh, revised 10 Aug 2007. [Downloadable!]
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  11. Sanne Zwart, 2005. "Liquidity runs with endogenous information acquisition," Economics Working Papers ECO2005/18, European University Institute. [Downloadable!]
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  12. Markus K Brunnermeier & John Morgan, 2004. "Clock Games: Theory and Experiments," Levine's Bibliography 122247000000000401, UCLA Department of Economics. [Downloadable!]
  13. John Duffy, 2008. "Macroeconomics: A Survey of Laboratory Research," Working Papers 334, University of Pittsburgh, Department of Economics, revised Mar 2008. [Downloadable!]
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