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On the role of non-equilibrium focal points as coordination devices

  • Bosch-Domènech, Antoni
  • Vriend, Nicolaas J.

Considering a pure coordination game with a large number of equivalent equilibria, we argue that a focal point that is itself not a Nash equilibrium, and is Pareto dominated by all Nash equilibria, may enhance coordination substantially. Besides attracting the players’ choices to itself, such a non-equilibrium focal point may act as an equilibrium selection device that the players use to coordinate on a small subset of Nash equilibria. We present experimental support for these two roles of non-equilibrium focal points as coordination devices, and suggest a theoretical explanation for this.

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Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 94 (2013)
Issue (Month): C ()
Pages: 52-67

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Handle: RePEc:eee:jeborg:v:94:y:2013:i:c:p:52-67
Contact details of provider: Web page: http://www.elsevier.com/locate/jebo

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