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When are Nash equilibria self-enforcing? An experimental analysis

Author

Listed:
  • Kenneth Clark

    (School of Economic Studies, Faculty of Economic and Social Studies, Dover Street, University of Manchester, Manchester M13 9PL.)

  • Stephen Kay

    (School of Economic Studies, Faculty of Economic and Social Studies, Dover Street, University of Manchester, Manchester M13 9PL.)

  • Martin Sefton

    (School of Economic Studies, Faculty of Economic and Social Studies, Dover Street, University of Manchester, Manchester M13 9PL.)

Abstract

We investigate the effect of non-binding pre-play communication in experiments with simple two-player coordination games. We reproduce the results of other studies in which play converges to a Pareto-dominated equilibrium in the absence of communication, and communication moves outcomes in the direction of the Pareto-dominant equilibrium. However, we provide new results which show that the effectiveness of communication is sensitive to the structure of payoffs. Our results support an argument put forward by Aumann: agreements to play a Nash equilibrium are fragile when players have a strict preference over their opponent's strategy choice. We also find that informative communication does not necessarily lead to the Pareto-dominant equilibrium.

Suggested Citation

  • Kenneth Clark & Stephen Kay & Martin Sefton, 2001. "When are Nash equilibria self-enforcing? An experimental analysis," International Journal of Game Theory, Springer;Game Theory Society, vol. 29(4), pages 495-515.
    • Handle: RePEc:spr:jogath:v:29:y:2001:i:4:p:495-515
    Note: Received: January 1997/Revised version: February 1997
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    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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