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On the Role of Non-equilibrium Focal Points as Coordination Devices

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  • Antoni Bosch-Dom�nech

    ()
    (Universitat Pompeu Fabra and CREA, Barcelona)

  • Nicolaas J. Vriend

    ()
    (Queen Mary, University of London)

Abstract

Considering a pure coordination game with a large number of equivalent equilibria, we argue, first, that a focal point that is itself not a Nash equilibrium and is Pareto dominated by all Nash equilibria, may attract the players' choices. Second, we argue that such a non-equilibrium focal point may act as an equilibrium selection device that the players use to coordinate on a closely related small subset of Nash equilibria. We present theoretical as well as experimental support for these two new roles of focal points as coordination devices.

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Paper provided by Queen Mary, University of London, School of Economics and Finance in its series Working Papers with number 621.

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Date of creation: Feb 2008
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Handle: RePEc:qmw:qmwecw:wp621

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Keywords: Coordination game; Focal point; Nash equilibrium; Equilibrium selection; Coordination device;

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Cited by:
  1. Israel Waichman & Artem Korzhenevych & Till Requate, 2010. "Equal Split in the Informal Market for Group Train Travel," Kiel Working Papers 1638, Kiel Institute for the World Economy.
  2. Dietmar Fehr & Frank Heinemann & Aniol Llorente-Saguer, 2011. "The Power of Sunspots: An Experimental Analysis," SFB 649 Discussion Papers SFB649DP2011-070, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  3. Bizer, Kilian & Meub, Lukas & Proeger, Till & Spiwoks, Markus, 2014. "Strategic coordination in forecasting: An experimental study," Center for European, Governance and Economic Development Research Discussion Papers 195, University of Goettingen, Department of Economics.
  4. Giovanna Devetag & Sibilla Di Guida, 2010. "Feature-based Choice and Similarity in Normal-form Games: An Experimental Study," DISA Working Papers 1007, Department of Computer and Management Sciences, University of Trento, Italy, revised 03 Nov 2010.
  5. Sibilla Di Guida & Giovanna Devetag, 2013. "Feature-Based Choice and Similarity Perception in Normal-Form Games: An Experimental Study," Games, MDPI, Open Access Journal, vol. 4(4), pages 776-794, December.

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