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Optimization incentive and relative riskiness in experimental coordination games

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Author Info

  • Dimitri Dubois

    ()
    (LAMETA (UMR CNRS 5474), Universit� Montpellier 1, avenue de la mer, site Richter, C.S. 79606, 34960 Montpellier c�dex 2, France.)

  • Marc Willinger

    ()
    (LAMETA (UMR CNRS 5474), Universit� Montpellier 1, avenue de la mer, site Richter, C.S. 79606, 34960 Montpellier c�dex 2, France.)

  • Phu Nguyen-Van

    ()
    (THEMA-CNRS, Universit� de Cergy-Pontoise, 33 Boulevard du Port, F-95011 Cergy-Pontoise Cedex, France.)

Abstract

We compare the experimental results of three stag-hunt games. In contrast to Battalio et al. (2001), our design keeps the riskiness ratio of the payoff-dominant and the risk-dominant strategies at a constant level as the optimisation premium is increased. We define the riskiness ratio as the relative payoff range of the two strategies. We find that decreasing the riskiness ratio while keeping the optimization premium constant increases sharply the frequency of the risk-dominant strategy. On the other hand an increase of the optimization premium with a constant riskiness ratio has no effect on the choice frequencies. Finally, we confirm the dynamic properties found by Battalio et al. that increasing the optimization premium favours best-response and sensitivity to the history of play.

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Bibliographic Info

Paper provided by Development and Policies Research Center (DEPOCEN), Vietnam in its series Working Papers with number 02.

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Length: 14 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:dpc:wpaper:0209

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Keywords: Coordination game; Game theory; Experimental economics.;

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  1. Cooper, Russell, et al, 1992. "Communication in Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 739-71, May.
  2. Friedman, Daniel, 1996. "Equilibrium in Evolutionary Games: Some Experimental Results," Economic Journal, Royal Economic Society, vol. 106(434), pages 1-25, January.
  3. Clark, K. & Kay, S. & Sefton, M, 1997. "When Are Nash Equilibria Self Enforcing ? An Experimental Analysis," Working Papers 97-04, University of Iowa, Department of Economics.
  4. Schmidt, David & Shupp, Robert & Walker, James M. & Ostrom, Elinor, 2003. "Playing safe in coordination games:: the roles of risk dominance, payoff dominance, and history of play," Games and Economic Behavior, Elsevier, vol. 42(2), pages 281-299, February.
  5. 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.
  6. Claudia Keser & Bodo Vogt, 2000. "Why Do Experimental Subjects Choose an Equilibrium which Is Neither Payoff Nor Risk Dominant?," CIRANO Working Papers 2000s-34, CIRANO.
  7. Jordi Brandts & David J. Cooper, 2006. "A Change Would Do You Good .... An Experimental Study on How to Overcome Coordination Failure in Organizations," American Economic Review, American Economic Association, vol. 96(3), pages 669-693, June.
  8. Battalio, Raymond & Samuelson, Larry & Van Huyck, John, 2001. "Optimization Incentives and Coordination Failure in Laboratory Stag Hunt Games," Econometrica, Econometric Society, vol. 69(3), pages 749-64, May.
  9. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
  10. Cachon, Gerard P & Camerer, Colin F, 1996. "Loss-Avoidance and Forward Induction in Experimental Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 165-94, February.
  11. Carlsson, H. & Damme, E.E.C. van, 1990. "Global games and equilibrium selection," Discussion Paper 1990-52, Tilburg University, Center for Economic Research.
  12. 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.
  13. 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.
  14. Luca Anderlini, 1995. "Communication, Computability and Common Interest Games," Game Theory and Information 9510003, EconWPA.
  15. McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
  16. Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1991. "Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 885-910, August.
  17. Van Huyck, John B & Battalio, Raymond C & Rankin, Frederick W, 1997. "On the Origin of Convention: Evidence from Coordination Games," Economic Journal, Royal Economic Society, vol. 107(442), pages 576-96, May.
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Cited by:
  1. Martin Brown & Stefan Trautmann & Razvan Vlahu, 2012. "Contagious Bank Runs: Experimental Evidence," DNB Working Papers 363, Netherlands Central Bank, Research Department.

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