Coordination games: Escaping the straitjacket

Coordination problems lie at the heart of many real-world financial phenomena. Classic examples are bank runs, debt refinancing, startups under network externalities, and speculative currency attacks. The lack of predictability in such problems poses a serious problem for many academics and practitioners when it comes to predicting, for instance, the onset of speculative currency attacks. Global games and Poisson games have been proposed to address this equilibrium indeterminacy. Global games assume that agents face idiosyncratic uncertainty about economic fundamentals, whereas Poisson games model the number of actual players as a Poisson random variable to capture population uncertainty in large games. We first provide an overview of the literature and propose unresolved questions for future research. Next, we describe the innovative methodology in Ioannou and Makris (2019) that accommodates for the aforementioned sources of uncertainty. We complement existing results on single-shot experiments with new results that pertain to repeated interactions.