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When Are Nash Equilibria Self-Enforcing? An Experimental Analysis

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  • Kenneth Clark

    (University of Manchester)

  • Stephen Kay

    (University of Manchester)

  • Martin Sefton

    (University of Manchester)

Abstract

We investigate the effect of non-binding pre-play communication in experiments with simple two-player coordination games. We reproduce the results of other studies in which play converges to a Pareto-dominated equilibrium in the absence of communication, and communication moves outcomes in the direction of the Pareto-dominant equilibrium. However, we provide new results which show that the effectiveness of communication is sensitive to the structure of payoffs. Our results support an argument put forward by Aumann: agreements to play a Nash equilibrium are fragile when players have a strict preference over their opponent's strategy choice. We also find that informative communication does not necessarily lead to the Pareto-dominant equilibrium.

Suggested Citation

  • Kenneth Clark & Stephen Kay & Martin Sefton, 1997. "When Are Nash Equilibria Self-Enforcing? An Experimental Analysis," Experimental 9707001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpex:9707001
    Note: Type of Document - WordPerfect; pages: 33 ; figures: included. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.
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    References listed on IDEAS

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    Keywords

    Sefton;

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments

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