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On the role of non-equilibrium focal points as coordination devices

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  • Bosch-Domènech, Antoni
  • Vriend, Nicolaas J.

Abstract

Considering a pure coordination game with a large number of equivalent equilibria, we argue that a focal point that is itself not a Nash equilibrium, and is Pareto dominated by all Nash equilibria, may enhance coordination substantially. Besides attracting the players’ choices to itself, such a non-equilibrium focal point may act as an equilibrium selection device that the players use to coordinate on a small subset of Nash equilibria. We present experimental support for these two roles of non-equilibrium focal points as coordination devices, and suggest a theoretical explanation for this.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 94 (2013)
Issue (Month): C ()
Pages: 52-67

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Handle: RePEc:eee:jeborg:v:94:y:2013:i:c:p:52-67

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Web page: http://www.elsevier.com/locate/jebo

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Keywords: Coordination game; Non-equilibrium; Focal point; Nash equilibrium; Equilibrium selection; Coordination device;

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Citations

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Cited by:
  1. Dietmar Fehr & Frank Heinemann & Aniol Llorente-Saguer, 2011. "The Power of Sunspots: An Experimental Analysis," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2011_33, Max Planck Institute for Research on Collective Goods.
  2. Bizer, Kilian & Meub, Lukas & Proeger, Till & Spiwoks, Markus, 2014. "Strategic coordination in forecasting: An experimental study," Center for European, Governance and Economic Development Research Discussion Papers 195, University of Goettingen, Department of Economics.
  3. Sibilla Di Guida & Giovanna Devetag, 2013. "Feature-Based Choice and Similarity Perception in Normal-Form Games: An Experimental Study," Games, MDPI, Open Access Journal, vol. 4(4), pages 776-794, December.
  4. Israel Waichman & Artem Korzhenevych & Till Requate, 2010. "Equal Split in the Informal Market for Group Train Travel," Kiel Working Papers 1638, Kiel Institute for the World Economy.
  5. Giovanna Devetag & Sibilla Di Guida, 2010. "Feature-based Choice and Similarity in Normal-form Games: An Experimental Study," LEM Papers Series 2010/18, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.

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