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Why do experimental subjects choose an equilibrium which is neither risk nor payoff dominant

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Author Info
Keser, Claudia () (Institut für Statistik und Mathematische Wirtschaftstheorie)
Vogt, Bodo () (Universität Magdeburg)
Abstract

In an experimental 2x2 coordination game with two strict equilibria we observe that, in contrast to equilibrium selection theory (Harsanyi and Selten 1988), only half of the subjects choose the strategy that relates to the payoff- and risk-dominant equilibrium. We propose modified risk dominance as an explanation for the observed deviations from payoff and risk dominance.

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Paper provided by Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim in its series Sonderforschungsbereich 504 Publications with number 00-40.

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Length: 11 pages
Date of creation: 00 0000
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Handle: RePEc:xrs:sfbmaa:00-40

Note: We thank Roy Gardner and Werner Güth for their helpful comments. Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged. Thanks are also due to the research group
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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.:
  1. Brandts Jordi & Macleod W. Bentley, 1995. "Equilibrium Selection in Experimental Games with Recommended Play," Games and Economic Behavior, Elsevier, vol. 11(1), pages 36-63, October. [Downloadable!] (restricted)
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  2. Cooper, Russell, et al, 1992. "Communication in Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 739-71, May. [Downloadable!] (restricted)
  3. Clark, K. & Kay, S. & Sefton, M, 1997. "When Are Nash Equilibria Self Enforcing ? An Experimental Analysis," Working Papers 97-04, University of Iowa, Department of Economics.
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  4. COOPER, R. & DEJONG, D.V. & FORSYTHE, R. & Tom Ross, 1989. "Communication In Coordination Games," Carleton Industrial Organization Research Unit (CIORU) 89-07, Carleton University, Department of Economics.
  5. Van Huyck, John B. & Gillette, Ann B. & Battalio, Raymond C., 1992. "Credible assignments in coordination games," Games and Economic Behavior, Elsevier, vol. 4(4), pages 606-626, October. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
  7. Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September. [Downloadable!] (restricted)
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  8. Cachon, Gerard P & Camerer, Colin F, 1996. "Loss-Avoidance and Forward Induction in Experimental Coordination Games," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 165-94, February. [Downloadable!] (restricted)
  9. Anderlini, L., 1990. "Communication, Computability And Common Interest Games," Papers 159, Cambridge - Risk, Information & Quantity Signals.
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  10. Berninghaus, Siegfried K. & Ehrhart, Karl-Martin, 1998. "Time horizon and equilibrium selection in tacit coordination games: Experimental results," Journal of Economic Behavior & Organization, Elsevier, vol. 37(2), pages 231-248, October. [Downloadable!] (restricted)
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  1. Jonathan W. Leland, 2006. "Equilibrium Selection, Similarity Judgments and the“Nothing to Gain/Nothing to Lose”Effect," Levine's Working Paper Archive 321307000000000378, David K. Levine. [Downloadable!]
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