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When are Nash equilibria self-enforcing? An experimental analysis

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Author Info
Kenneth Clark (School of Economic Studies, Faculty of Economic and Social Studies, Dover Street, University of Manchester, Manchester M13 9PL.)
Stephen Kay (School of Economic Studies, Faculty of Economic and Social Studies, Dover Street, University of Manchester, Manchester M13 9PL.)
Martin Sefton (School of Economic Studies, Faculty of Economic and Social Studies, Dover Street, University of Manchester, Manchester M13 9PL.)

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Abstract

We investigate the effect of non-binding pre-play communication in experiments with simple two-player coordination games. We reproduce the results of other studies in which play converges to a Pareto-dominated equilibrium in the absence of communication, and communication moves outcomes in the direction of the Pareto-dominant equilibrium. However, we provide new results which show that the effectiveness of communication is sensitive to the structure of payoffs. Our results support an argument put forward by Aumann: agreements to play a Nash equilibrium are fragile when players have a strict preference over their opponent's strategy choice. We also find that informative communication does not necessarily lead to the Pareto-dominant equilibrium.

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Publisher Info
Article provided by Springer in its journal International Journal of Game Theory.

Volume (Year): 29 (2001)
Issue (Month): 4 ()
Pages: 495-515
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Handle: RePEc:spr:jogath:v:29:y:2001:i:4:p:495-515

Note: Received: January 1997/Revised version: February 1997
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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Straub, Paul G., 1995. "Risk dominance and coordination failures in static games," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(4), pages 339-363. [Downloadable!] (restricted)
  2. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384.
  3. Cooper, Russell, et al, 1992. "Communication in Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 739-71, May. [Downloadable!] (restricted)
  4. COOPER, R. & DEJONG, D.V. & FORSYTHE, R. & Tom Ross, 1989. "Communication In Coordination Games," Carleton Industrial Organization Research Unit (CIORU) 89-07, Carleton University, Department of Economics.
  5. Harsanyi John C., 1995. "A New Theory of Equilibrium Selection for Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 10(2), pages 318-332, August. [Downloadable!] (restricted)
  6. Farrell, Joseph & Rabin, Matthew, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-18, Summer. [Downloadable!] (restricted)
  7. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June. [Downloadable!] (restricted)
  8. Jose Luis Ferreira, 1990. "A Communication-Proof Equilibrium Concept," Discussion Papers 896, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
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  9. Roth, Alvin E, 1980. "Values for Games without Sidepayments: Some Difficulties with Current Concepts," Econometrica, Econometric Society, vol. 48(2), pages 457-65, March. [Downloadable!] (restricted)
  10. Farrell, Joseph, 1988. "Communication, coordination and Nash equilibrium," Economics Letters, Elsevier, vol. 27(3), pages 209-214. [Downloadable!] (restricted)
  11. Cooper, Russell, et al, 1990. "Selection Criteria in Coordination Games: Some Experimental Results," American Economic Review, American Economic Association, vol. 80(1), pages 218-33, March. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Stefano Demichelis & Jörgen Weibull, 2009. "Language, meaning and games A model of communication, coordination and evolution," Working Papers hal-00354224_v1, HAL. [Downloadable!]
    Other versions:
  2. Rigdon, Mary, 2005. "Trust and reciprocity in incentive contracting," MPRA Paper 2007, University Library of Munich, Germany, revised 15 May 2006. [Downloadable!]
    Other versions:
  3. Giovanna Devetag & Andreas Ortmann, 2007. "When and why? A critical survey on coordination failure in the laboratory," Experimental Economics, Springer, vol. 10(3), pages 331-344, September. [Downloadable!] (restricted)
    Other versions:
  4. Heike Hennig-Schmidt, 2008. "The Framing of Games and the Psychology of Play," Bonn Econ Discussion Papers bgse15_2008, University of Bonn, Germany. [Downloadable!]
  5. Manzini, P. & Sadrieh, A. & Vriend, N.J., 2002. "On smiles, winks, and handshake as coordination devices," Discussion Paper 40, Tilburg University, Center for Economic Research. [Downloadable!]
    Other versions:
  6. C. Mónica Capra & Tomomi Tanaka, 2006. "Communication and the extraction of natural renewable resources with threshold externalities," Emory Economics 0602, Department of Economics, Emory University (Atlanta). [Downloadable!]
  7. Martin Sefton, 1999. "A Model of Behavior in Coordination Game Experiments," Experimental Economics, Springer, vol. 2(2), pages 151-164, December. [Downloadable!] (restricted)
  8. Demichelis, Stefano & Weibull, Jörgen, 2006. "Efficiency, communication and honesty," Working Paper Series in Economics and Finance 645, Stockholm School of Economics, revised 28 Nov 2006. [Downloadable!]
  9. López-Pérez, Raúl, 2008. "The Power of Words: Why Communication fosters Cooperation and Efficiency," Working Papers in Economic Theory 2009/01, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History). [Downloadable!]
  10. Ellingsen, Tore & Östling, Robert, 2006. "Organizational Structure as the Channeling of Boundedly Rational Pre-play Communication," Working Paper Series in Economics and Finance 634, Stockholm School of Economics. [Downloadable!]
  11. Vyrastekova, J., 2002. "Efficiency versus risk dominance in an evolutionary model with cheap talk," Discussion Paper 6, Tilburg University, Center for Economic Research. [Downloadable!]
  12. Klaus Abbink & Silvia Pezzini, 2005. "Determinants of Revolt: Evidence from Survey and Laboratory Data," Discussion Papers 2005-01, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham. [Downloadable!]
  13. Quazi Shahriar & Subhasish Dugar, 2009. "Focal Points and Economic Efficiency: Role of Relative Label Salience," Working Papers 0033, San Diego State University, Department of Economics. [Downloadable!]
  14. repec:att:wimass:1919982 is not listed on IDEAS
  15. Keser, Claudia & Vogt, Bodo, 0000. "Why do experimental subjects choose an equilibrium which is neither risk nor payoff dominant," Sonderforschungsbereich 504 Publications 00-40, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim. [Downloadable!]
  16. Ellingsen, Tore & Östling, Robert, 2007. "When Does Communication Improve Coordination?," Working Paper Series in Economics and Finance 680, Stockholm School of Economics, revised 19 Jun 2008. [Downloadable!]
  17. Antonio Cabrales & Walter Garcia Fontes, 2000. "Estimating Learning Models from Experimental Data," Economics Working Papers 501, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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