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Promoting coordination in summary-statistic games

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  • Dominik Erharter

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    Abstract

    This paper studies how external incentives can help agents to coordinate in summary-statistic games. Agents follow a myopic best-reply rule and face a trade-off between efficiency and strategic uncertainty. A principal can help agents to coordinate on the Pareto optimal equilibrium by monitoring an appropriate number of agents. The optimal monitoring policy is 'minimally-invasive' - for every strategy profile of the agents, the principal either monitors just enough agents to make high effort a best-reply or does not monitor at all. Furthermore, given the principal's payoffs are supermodular and increasing at an increasing rate, the optimal monitoring policy is monotone in the number of agents who choose high effort.

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    File URL: http://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2013-28.pdf
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    Bibliographic Info

    Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2013-28.

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    Length: 43 pages
    Date of creation: Oct 2013
    Date of revision:
    Handle: RePEc:inn:wpaper:2013-28

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    Related research

    Keywords: adaptive learning; Markov decision process; coordination failure; order-statistic game;

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    1. Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1990. "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure," American Economic Review, American Economic Association, vol. 80(1), pages 234-48, March.
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    13. Ellison, Glenn, 2000. "Basins of Attraction, Long-Run Stochastic Stability, and the Speed of Step-by-Step Evolution," Review of Economic Studies, Wiley Blackwell, vol. 67(1), pages 17-45, January.
    14. Devetag, Giovanna, 2005. "Precedent transfer in coordination games: An experiment," Economics Letters, Elsevier, vol. 89(2), pages 227-232, November.
    15. 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.
    16. V. Crawford, 2010. "Adaptive Dynamics in Coordination Games," Levine's Working Paper Archive 404, David K. Levine.
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