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The Nature of Salience Revisited: Cognitive Hierarchy Theory versus Team Reasoning

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Author Info

  • Nicolas Bardsley

    (National Centre for Research Methods, University of Southampton)

  • Judith Mehta

    (School of Economics, University of East Anglia)

  • Chris Starmer

    (CeDEx, University of Nottingham)

  • Robert Sugden

    (School of Economics, University of East Anglia)

Abstract

This paper reports experimental tests of two alternative explanations of how players use focal points to select equilibria in one-shot coordination games. Cognitive hierarchy theory explains coordination as the result of common beliefs about players’ pre-reflective inclinations towards the relevant strategies; the theory of team reasoning explains it as the result of the players’ using a non-standard form of reasoning. We report two experiments; one finds support for the first theory, the other for the second. In the light of additional questionnaire evidence, we conclude that players’ reasoning is sensitive to the decision context.

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Bibliographic Info

Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2006-17.

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Date of creation: Sep 2006
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Handle: RePEc:cdx:dpaper:2006-17

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Keywords: salience; focal point; cognitive hierarchy; team reasoning;

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References

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  1. Cubitt, Robin P. & Sugden, Robert, 2003. "Common Knowledge, Salience And Convention: A Reconstruction Of David Lewis' Game Theory," Economics and Philosophy, Cambridge University Press, vol. 19(02), pages 175-210, October.
  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, December.
  3. Bacharach, Michael & Stahl, Dale O., 2000. "Variable-Frame Level-n Theory," Games and Economic Behavior, Elsevier, vol. 32(2), pages 220-246, August.
  4. Maarten Janssen, 2001. "Rationalizing Focal Points," Theory and Decision, Springer, vol. 50(2), pages 119-148, March.
  5. Crawford, Vincent P & Haller, Hans, 1990. "Learning How to Cooperate: Optimal Play in Repeated Coordination Games," Econometrica, Econometric Society, vol. 58(3), pages 571-95, May.
  6. Papke, Leslie E & Wooldridge, Jeffrey M, 1996. "Econometric Methods for Fractional Response Variables with an Application to 401(K) Plan Participation Rates," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 619-32, Nov.-Dec..
  7. Sugden, Robert, 1995. "A Theory of Focal Points," Economic Journal, Royal Economic Society, vol. 105(430), pages 533-50, May.
  8. Binmore, Ken & Samuelson, Larry, 2006. "The evolution of focal points," Games and Economic Behavior, Elsevier, vol. 55(1), pages 21-42, April.
  9. Bacharach, Michael, 1999. "Interactive team reasoning: A contribution to the theory of co-operation," Research in Economics, Elsevier, vol. 53(2), pages 117-147, June.
  10. Bacharach, Michael & Bernasconi, Michele, 1997. "The Variable Frame Theory of Focal Points: An Experimental Study," Games and Economic Behavior, Elsevier, vol. 19(1), pages 1-45, April.
  11. Sugden, Robert & Zamarron, Ignacio E., 2006. "Finding the key: The riddle of focal points," Journal of Economic Psychology, Elsevier, vol. 27(5), pages 609-621, October.
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Cited by:
  1. Abitbol, Pablo, 2009. "An Experiment on Intercultural Tacit Coordination - Preliminary Report," MPRA Paper 23474, University Library of Munich, Germany.
  2. Bosch-Domènech, Antoni & Vriend, Nicolaas J., 2013. "On the role of non-equilibrium focal points as coordination devices," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 52-67.
  3. 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.

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