Measuring Strategic Uncertainty in Coordination Games
This paper proposes a method to measure strategic uncertainty by eliciting certainty equivalents analogous to measuring risk attitudes in lotteries. We apply this method by conducting experiments on a class of one-shot coordination games with strategic complementarities and choices between simple lotteries and sure payoff alternatives, both framed in a similar way. Despite the multiplicity of equilibria in the coordination games, aggregate behaviour is fairly predictable. The pure or mixed Nash equilibria cannot describe subjects' behaviour. We present two global games with private information about monetary payoffs and about risk aversion. While previous literature treats the parameters of a global game as given, we estimate them and show that both models describe observed behaviour well. The global-game selection for vanishing noise of private signals offers a good recommendation for actual players, given the observed distribution of actions. We also deduce subjective beliefs and compare them with objective probabilities. Copyright , Wiley-Blackwell.
Volume (Year): 76 (2009)
Issue (Month): 1 ()
|Contact details of provider:|| |
References listed on IDEAS
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.:
- Carlsson, H. & Van Damme, E., 1990.
"Global Games And Equilibrium Selection,"
9052, Tilburg - Center for Economic Research.
- Carlsson, H. & van Damme, E.E.C., 1990. "Global games and equilibrium selection," Discussion Paper 1990-52, Tilburg University, Center for Economic Research.
- Carlsson, H. & van Damme, E.E.C., 1993. "Global games and equilibrium selection," Other publications TiSEM 49a54f00-dcec-4fc1-9488-4, Tilburg University, School of Economics and Management.
- Hans Carlsson & Eric van Damme, 1993. "Global Games and Equilibrium Selection," Levine's Working Paper Archive 122247000000001088, David K. Levine.
- R. J. Aumann & J. H. Dreze, 2004.
"Assessing Strategic Risk,"
Discussion Paper Series
dp361, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
- AUMANN, Robert J. & DREZE, Jacques H., . "Assessing strategic risk," CORE Discussion Papers RP 2089, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- AUMANN, Robert J. & DREZE, Jacques H., 2005. "Assessing strategic risk," CORE Discussion Papers 2005020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- R.J., AUMANN & Jacques-Henri, DREZE, 2005. "Assessing Strategic Risk," Discussion Papers (ECON - Département des Sciences Economiques) 2005020, Université catholique de Louvain, Département des Sciences Economiques.
- John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384.
- Stephen Morris & Hyun Song Shin, 2000.
"Global Games: Theory and Applications,"
Cowles Foundation Discussion Papers
1275R, Cowles Foundation for Research in Economics, Yale University, revised Aug 2001.
- Stephen Morris & Hyun Song Shin, 2000. "Global Games: Theory and Applications," Cowles Foundation Discussion Papers 1275, Cowles Foundation for Research in Economics, Yale University.
- Stephen Morris & Hyun S Shin, 2001. "Global Games: Theory and Applications," Levine's Working Paper Archive 122247000000001080, David K. Levine.
- Berninghaus, Siegfried K. & Ehrhart, Karl-Martin, 2001. "Coordination and information: recent experimental evidence," Economics Letters, Elsevier, vol. 73(3), pages 345-351, December.
- Christian Hellwig, 2002. "Imperfect Common Knowledge of Preferences in Global Coordination Games (October 2002)," UCLA Economics Online Papers 211, UCLA Department of Economics.
- Laura Schechter, 2005.
"Traditional trust measurement and the risk confound: An experiment in rural paraguay,"
Artefactual Field Experiments
00106, The Field Experiments Website.
- Schechter, Laura, 2007. "Traditional trust measurement and the risk confound: An experiment in rural Paraguay," Journal of Economic Behavior & Organization, Elsevier, vol. 62(2), pages 272-292, February.
- Charles A. Holt & Susan K. Laury, 2002. "Risk Aversion and Incentive Effects," American Economic Review, American Economic Association, vol. 92(5), pages 1644-1655, December.
- Antonio Cabrales & Rosemarie Nagel & Roc Armenter, 2007.
"Equilibrium selection through incomplete information in coordination games: an experimental study,"
Springer;Economic Science Association, vol. 10(3), pages 221-234, September.
- Rosemarie Nagel & Antonio Cabrales & Roc Armenter, 2002. "Equilibrium selection through incomplete information in coordination games: An experimental study," Economics Working Papers 601, Department of Economics and Business, Universitat Pompeu Fabra.
- Goeree, Jacob K. & Holt, Charles A. & Palfrey, Thomas R., 2003. "Risk averse behavior in generalized matching pennies games," Games and Economic Behavior, Elsevier, vol. 45(1), pages 97-113, October.
- Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2004. "The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information," Econometrica, Econometric Society, vol. 72(5), pages 1583-1599, 09.
- Yaw Nyarko & Andrew Schotter, 2002. "An Experimental Study of Belief Learning Using Elicited Beliefs," Econometrica, Econometric Society, vol. 70(3), pages 971-1005, May.
- Bohnet, Iris & Zeckhauser, Richard, 2003.
"Trust, Risk and Betrayal,"
Working Paper Series
rwp03-041, Harvard University, John F. Kennedy School of Government.
- R. McKelvey & T. Palfrey, 2010.
"Quantal Response Equilibria for Normal Form Games,"
Levine's Working Paper Archive
510, David K. Levine.
- Charles F. Manski, 2004. "Measuring Expectations," Econometrica, Econometric Society, vol. 72(5), pages 1329-1376, 09.
- Andreas Lange & John A. List & Michael K. Price, 2004. "Auctions with Resale When Private Values Are Uncertain: Theory and Empirical Evidence," NBER Working Papers 10639, National Bureau of Economic Research, Inc.
- Schmidt, David & Shupp, Robert & Walker, James M. & Ostrom, Elinor, 2003. "Playing safe in coordination games:: the roles of risk dominance, payoff dominance, and history of play," Games and Economic Behavior, Elsevier, vol. 42(2), pages 281-299, February.
When requesting a correction, please mention this item's handle: RePEc:oup:restud:v:76:y:2009:i:1:p:181-221. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.