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Heterogeneous Focal Points, Fairness, and Coordination

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  • López-Pérez, Raúl

    ()
    (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.)

Abstract

In games with multiple equilibria, the fairest equilibrium –in case one exists- may be the obvious solution for some players but not for others, and players can be aware of this heterogeneity. This paper theoretically explores how coordination could be achieved in this case. The model is consistent with abundant experimental evidence and explains, for instance, why (a) the attractiveness of the fair equilibrium, (b) out-of-equilibrium payoffs, (c) dominated strategies, and (d) the number of players and available strategies matter for coordination. The model is compared with alternative equilibrium selection criteria like risk and payoff dominance and ideas for new experiments are suggested.

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Bibliographic Info

Paper provided by Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History) in its series Working Papers in Economic Theory with number 2007/14.

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Length: 26 pages
Date of creation: Nov 2007
Date of revision:
Handle: RePEc:uam:wpaper:200714

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Keywords: Coordination; Equilibrium Refinement; Fairness; Focal Points; Heterogeneity;

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  1. Jordi Brandts & David J. Cooper, 2005. "It's What You Say Not What You Pay," UFAE and IAE Working Papers 643.05, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  2. Mehta, Judith & Starmer, Chris & Sugden, Robert, 1994. "The Nature of Salience: An Experimental Investigation of Pure Coordination Games," American Economic Review, American Economic Association, vol. 84(3), pages 658-73, June.
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