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Does information transparency decrease coordination failure?

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  • Anctil, Regina M.
  • Dickhaut, John
  • Johnson, Cathleen
  • Kanodia, Chandra

Abstract

We test the effect of information transparency on the probability of coordination failure in games with finite signals. Prior theory has shown that the effect of information transparency is ambiguous. Our study is based on two insights. Where signal space is finite, increased transparency usually destroys uniqueness of equilibria; and increasing transparency can reverse the risk-dominance ordering of equilibria. Our experiments show that increasing transparency improves coordination only when transparency makes the efficient equilibrium risk dominant. Coordination is degraded when increased transparency causes the secure equilibrium to be risk dominant. These results are consistent with subjects holding level-1 beliefs.

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  • Anctil, Regina M. & Dickhaut, John & Johnson, Cathleen & Kanodia, Chandra, 2010. "Does information transparency decrease coordination failure?," Games and Economic Behavior, Elsevier, vol. 70(2), pages 228-241, November.
  • Handle: RePEc:eee:gamebe:v:70:y:2010:i:2:p:228-241
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    1. repec:spr:grdene:v:23:y:2014:i:3:d:10.1007_s10726-013-9341-y is not listed on IDEAS
    2. Andrey Pavlov & Susan Wachter & Albert Alex Zevelev, 2016. "Transparency in the Mortgage Market," Journal of Financial Services Research, Springer;Western Finance Association, vol. 49(2), pages 265-280, June.

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