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When Does Communication Improve Coordination?

  • Tore Ellingsen
  • Robert �stling

We study costless pre-play communication of intentions among inexperienced players. Using the level-k model of strategic thinking to describe players' beliefs, we fully characterize the effects of preplay communication in symmetric 2x2 games. One-way communication weakly increases coordination on Nash equilibrium outcomes, although average payoffs sometimes decrease. Two-way communication further improves payoffs in some games but is detrimental in others. Moving beyond the class of symmetric 2x2 games, we find that communication facilitates coordination in common interest games with positive spillovers and strategic complementarities, but there are also games in which any type of communication hampers coordination. (JEL C72, D83)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1695
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 100 (2010)
Issue (Month): 4 (September)
Pages: 1695-1724

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Handle: RePEc:aea:aecrev:v:100:y:2010:i:4:p:1695-1724
Note: DOI: 10.1257/aer.100.4.1695
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