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Coordination in the Presence of Asset Markets

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  • Shimon Kogan
  • Anthony Kwasnica
  • Roberto Weber

Abstract

We explore the relationship between outcomes in a coordination game and a pre-play asset market where asset values are determined by outcomes in the subsequent coordination game. Across two experiments, we vary the payoffs from the market relative to the game, the degree of interdependence in the game, and whether traders' asset payoffs are dependent on outcomes in their own or another game. Markets lead to significantly lower efficiency across treatments, even when they produce no distortion of incentives in the game. Market prices forecast game outcomes. Our experiments shed light on how financial markets may influence affiliated economic outcomes. (JEL C91, D83, G13, G14)

(This abstract was borrowed from another version of this item.)

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File URL: https://student-3k.tepper.cmu.edu/gsiadoc/wp/2007-E33.pdf
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Bibliographic Info

Paper provided by Carnegie Mellon University, Tepper School of Business in its series GSIA Working Papers with number 2007-E33.

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Handle: RePEc:cmu:gsiawp:1200124151

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Postal: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890
Web page: http://www.tepper.cmu.edu/

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Web: http://student-3k.tepper.cmu.edu/gsiadoc/GSIA_WP.asp

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Cited by:
  1. Christoph Engel & Sebastian Kube & Michael Kurschilgen, 2011. "Can we manage first impressions in cooperation problems? An experimental study on “Broken (and Fixed) Windows”," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2011_05, Max Planck Institute for Research on Collective Goods.
  2. Riedl Arno & Rohde Ingrid M.T. & Strobel Martin, 2011. "Efficient Coordination in Weakest-Link Games," Research Memoranda 057, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.

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