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When Does Communication Improve Coordination?

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  • Ellingsen, Tore

    ()
    (Dept. of Economics, Stockholm School of Economics)

  • Östling, Robert

    ()
    (Institute for International Economic Studies)

Abstract

We study costless pre-play communication of intentions among inexperienced players. Using the level-k model of strategic thinking to describe players' beliefs, we fully characterize the effects of pre-play communication in symmetric 2×2 games. One-way communication weakly increases coordination on Nash equilibrium outcomes, although average payoffs sometimes decrease. Two-way communication further improves payoffs in some games, but is detrimental in others. Moving beyond the class of symmetric 2×2 games, we find that communication facilitates coordination in common interest games with positive spillovers and strategic complementarities, but there are also games in which any type of communication hampers coordination.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 680.

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Length: 30 pages
Date of creation: 27 Nov 2007
Date of revision: 19 Jun 2008
Publication status: Published in American Economic Review, 2010, pages 1695-1724.
Handle: RePEc:hhs:hastef:0680

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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Web page: http://www.hhs.se/
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Keywords: Pre-play communication; cheap talk; coordination; level-k; cognitive hierarchy;

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References

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Citations

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Cited by:
  1. Dietrichson, Jens & Jochem, Torsten, 2014. "Organizational Coordination and Costly Communication with Boundedly Rational Agents," Working Papers 2014:2, Lund University, Department of Economics.
  2. Dietmar Fehr, 2011. "The Persistence of "Bad" Precedents and the Need for Communication: A Coordination Experiment," SFB 649 Discussion Papers SFB649DP2011-039, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  3. Andersson, Ola & Wengström, Erik, 2011. "Credible Communication and Cooperation: Experimental Evidence from Multi-stage Games," Working Paper Series 883, Research Institute of Industrial Economics.
  4. Kawagoe, Toshiji & Takizawa, Hirokazu, 2012. "Level-k analysis of experimental centipede games," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 548-566.
  5. Lai, Ernest K. & Lim, Wooyoung, 2012. "Authority and communication in the laboratory," Games and Economic Behavior, Elsevier, vol. 74(2), pages 541-560.
  6. Mohlin, Erik, 2012. "Evolution of theories of mind," Games and Economic Behavior, Elsevier, vol. 75(1), pages 299-318.
  7. Topi Miettinen, 2006. "Promises and Conventions - An Approach to Pre-play Agreements," Papers on Strategic Interaction 2006-29, Max Planck Institute of Economics, Strategic Interaction Group.
  8. Schlag, Karl H. & Vida, Péter, 2013. "Commitments, Intentions, Truth and Nash Equilibria," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 438, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  9. Andreas Blume, 2011. "The Dog That Did Not Bark: Pre-Play Communication with Foregone Costly Messages," Working Papers 438, University of Pittsburgh, Department of Economics, revised Jan 2011.
  10. Serra Garcia, M. & Damme, E.E.C. van & Potters, J.J.M., 2010. "Which Words Bond? An Experiment on Signaling in a Public Good Game (replaced by CentER DP 2011-139)," Discussion Paper 2010-33, Tilburg University, Center for Economic Research.
  11. Vincent P. Crawford & Miguel A. Costa-Gomes & Nagore Iriberri, 2010. "Strategic Thinking," Levine's Working Paper Archive 661465000000001148, David K. Levine.
  12. Crettez, Bertrand & Deloche, Régis, 2013. "On experimental economics and the comparison between the last two versions of Molière's Tartuffe," Journal of Economic Behavior & Organization, Elsevier, vol. 87(C), pages 66-72.

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