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Ten Isn't Large! Group Size and Coordination in a Large-Scale Experiment

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  • Jasmina Arifovic
  • Cars Hommes
  • Anita Kopányi-Peuker
  • Isabelle Salle

Abstract

We provide experimental evidence on coordination within large groups that could proxy the atomistic nature of real-world markets. We use a bank run game where the two pure-strategy equilibria can be ranked by payoff and risk dominance and a sequence of public announcements introduces stochastic sunspot equilibria. We find systematic group size effects that theory fails to predict. When the payoff-dominant strategy is risky enough, the behavior of small groups is uninformative of the behavior in large groups: unlike smaller groups of size ten, larger groups exclusively coordinate on the Pareto-inferior strategy and never coordinate on sunspots.

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  • Jasmina Arifovic & Cars Hommes & Anita Kopányi-Peuker & Isabelle Salle, 2023. "Ten Isn't Large! Group Size and Coordination in a Large-Scale Experiment," American Economic Journal: Microeconomics, American Economic Association, vol. 15(1), pages 580-617, February.
  • Handle: RePEc:aea:aejmic:v:15:y:2023:i:1:p:580-617
    DOI: 10.1257/mic.20200290
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    Cited by:

    1. Hubert J. Kiss & Ismael Rodriguez-Lara & Alfonso Rosa-Garcia, 2022. "Experimental bank runs," Chapters, in: Sascha Füllbrunn & Ernan Haruvy (ed.), Handbook of Experimental Finance, chapter 25, pages 347-361, Edward Elgar Publishing.
      • Hubert J. Kiss & Ismael Rodriguez-Lara & Alfonso Rosa-Garcia, 2021. "Experimental Bank Runs," ThE Papers 21/03, Department of Economic Theory and Economic History of the University of Granada..

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    More about this item

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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