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When Does Communication Improve Coordination?

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Author Info
Ellingsen, Tore () (Dept. of Economics, Stockholm School of Economics)
Östling, Robert () (Institute for International Economic Studies)

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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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Publisher 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
Handle: RePEc:hhs:hastef:0680

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Related research
Keywords: Pre-play communication; cheap talk; coordination; level-k; cognitive hierarchy;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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  1. Duffy, John & Feltovich, Nick, 2002. "Do Actions Speak Louder Than Words? An Experimental Comparison of Observation and Cheap Talk," Games and Economic Behavior, Elsevier, vol. 39(1), pages 1-27, April. [Downloadable!] (restricted)
  2. Miguel A. Costa-Gomes & Vincent P. Crawford, 2006. "Cognition and Behavior in Two-Person Guessing Games: An Experimental Study," American Economic Review, American Economic Association, vol. 96(5), pages 1737-1768, December. [Downloadable!]
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  3. Miguel A. Costa-Gomes & Georg Weizsäcker, 2004. "Stated Beliefs and Play in Normal Form Games," Levine's Bibliography 122247000000000236, UCLA Department of Economics. [Downloadable!]
    Other versions:
  4. Russell Cooper & Douglas V. DeJong & Robert Forsythe & Thomas W. Ross, 1989. "Communication in the Battle of the Sexes Game: Some Experimental Results," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 568-587, Winter. [Downloadable!] (restricted)
  5. 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!]
  6. 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.
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  7. Bhatt, Meghana & Camerer, Colin F., 2005. "Self-referential thinking and equilibrium as states of mind in games: fMRI evidence," Games and Economic Behavior, Elsevier, vol. 52(2), pages 424-459, August. [Downloadable!] (restricted)
  8. Tore Ellingsen & Magnus Johannesson, 2004. "Is There a Hold-up Problem?," Scandinavian Journal of Economics, Blackwell Publishing, vol. 106(3), pages 475-494, October. [Downloadable!] (restricted)
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  9. Stefano Demichelis & Jörgen W. Weibull, 2007. "Language, meaning and games: a model of communication, coordination and evolution," Carlo Alberto Notebooks 61, Collegio Carlo Alberto. [Downloadable!]
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  10. Colin F. Camerer & Teck-Hua Ho & Juin-Kuan Chong, 2004. "A Cognitive Hierarchy Model of Games," The Quarterly Journal of Economics, MIT Press, vol. 119(3), pages 861-898, August. [Downloadable!] (restricted)
  11. Miguel Costa-Gomes & Vincent P. Crawford & Bruno Broseta, 2000. "Cognition and Behavior in Normal-Form Games: An Experimental Study," University of California at San Diego, Economics Working Paper Series 2000-02r, Department of Economics, UC San Diego. [Downloadable!]
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  12. Anderlini, L., 1990. "Communication, Computability And Common Interest Games," Papers 159, Cambridge - Risk, Information & Quantity Signals.
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  13. Charness, Gary, 2000. "Self-Serving Cheap Talk: A Test Of Aumann's Conjecture," Games and Economic Behavior, Elsevier, vol. 33(2), pages 177-194, November. [Downloadable!] (restricted)
  14. Cai, Hongbin & Wang, Joseph Tao-Yi, 2006. "Overcommunication in strategic information transmission games," Games and Economic Behavior, Elsevier, vol. 56(1), pages 7-36, July. [Downloadable!] (restricted)
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