This paper explores predictability of behavior in coordination games with multiple equilibria. In a laboratory experiment we measure subjects' certainty equivalents for three coordination games and one lottery. Attitudes towards strategic uncertainty in coordination games are related to risk aversion, experience seeking, gender and age. From the distribution of certainty equivalents among participating students we estimate probabilities for successful coordination in a wide range of coordination games. For many games success of coordination is predictable with a reasonable error rate. The best response of a risk neutral player is close to the global-game solution. Comparing choices in coordination games with revealed risk aversion, we estimate subjective probabilities for successful coordination. In games with a low coordination requirement, most subjects underestimate the probability of success. In games with a high coordination requirement, most subjects overestimate this probability. Data indicate that subjects have probabilistic beliefs about success or failure of coordination rather than beliefs about individual behavior of other players.
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Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number
6.
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Carlsson, Hans & van Damme, Eric, 1993.
"Global Games and Equilibrium Selection,"
Econometrica,
Econometric Society, vol. 61(5), pages 989-1018, September.
[Downloadable!] (restricted)
Other versions:
R. J. Aumann & J. H. Dreze, 2004.
"Assessing Strategic Risk,"
Discussion Paper Series
dp361, Center for Rationality and Interactive Decision Theory, Hebrew University, Jerusalem.
[Downloadable!]
Other versions:
AUMANN, Robert J. & DREZE, Jacques H., 2005.
"Assessing strategic risk,"
CORE Discussion Papers
2005020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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