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Does information transparency decrease coordination failure?

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  • Anctil, Regina M.
  • Dickhaut, John
  • Johnson, Cathleen
  • Kanodia, Chandra

Abstract

We test the effect of information transparency on the probability of coordination failure in games with finite signals. Prior theory has shown that the effect of information transparency is ambiguous. Our study is based on two insights. Where signal space is finite, increased transparency usually destroys uniqueness of equilibria; and increasing transparency can reverse the risk-dominance ordering of equilibria. Our experiments show that increasing transparency improves coordination only when transparency makes the efficient equilibrium risk dominant. Coordination is degraded when increased transparency causes the secure equilibrium to be risk dominant. These results are consistent with subjects holding level-1 beliefs.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 70 (2010)
Issue (Month): 2 (November)
Pages: 228-241

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Handle: RePEc:eee:gamebe:v:70:y:2010:i:2:p:228-241

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Web page: http://www.elsevier.com/locate/inca/622836

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Keywords: Equilibrium selection Private information Strategic uncertainty Risk dominance Level-k thinking;

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