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Correlated equilibria, good and bad: an experimental study

  • Duffy, John
  • Feltovich, Nick

We report results from an experiment that explores the empirical validity of correlated equilibrium, an important generalization of the Nash equilibrium concept. Specifically, we seek to understand the conditions under which subjects playing the game of Chicken will condition their behavior on private, third–party recommendations drawn from known distributions. In a “good–recommendations” treatment, the distribution we use is a correlated equilibrium with payoffs better than any symmetric payoff in the convex hull of Nash equilibrium payoff vectors. In a “bad–recommendations” treatment, the distribution is a correlated equilibrium with payoffs worse than any Nash equilibrium payoff vector. In a “Nash–recommendations” treatment, the distribution is a convex combination of Nash equilibrium outcomes (which is also a correlated equilibrium), and in a fourth “very–good–recommendations” treatment, the distribution yields high payoffs, but is not a correlated equilibrium. We compare behavior in all of these treatments to the case where subjects do not receive recommendations. We find that when recommendations are not given to subjects, behavior is very close to mixed–strategy Nash equilibrium play. When recommendations are given, behavior does differ from mixed–strategy Nash equilibrium, with the nature of the differ- ences varying according to the treatment. Our main finding is that subjects will follow third–party recommendations only if those recommendations derive from a correlated equilibrium, and further, if that correlated equilibrium is payoff–enhancing relative to the available Nash equilibria.

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Paper provided by Scottish Institute for Research in Economics (SIRE) in its series SIRE Discussion Papers with number 2010-123.

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Date of creation: 2010
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Handle: RePEc:edn:sirdps:362
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  1. Sergiu Hart & Andreu Mas-Colell, 1997. "A Simple Adaptive Procedure Leading to Correlated Equilibrium," Game Theory and Information 9703006, EconWPA, revised 24 Mar 1997.
  2. Moreno, Diego & Wooders, John, 1996. "Coalition-Proof Equilibrium," Games and Economic Behavior, Elsevier, vol. 17(1), pages 80-112, November.
  3. Foster, Dean P. & Vohra, Rakesh V., 1997. "Calibrated Learning and Correlated Equilibrium," Games and Economic Behavior, Elsevier, vol. 21(1-2), pages 40-55, October.
  4. Van Huyck, John B. & Gillette, Ann B. & Battalio, Raymond C., 1992. "Credible assignments in coordination games," Games and Economic Behavior, Elsevier, vol. 4(4), pages 606-626, October.
  5. Seely, Beth & Van Huyck, John & Battalio, Raymond, 2005. "Credible assignments can improve efficiency in laboratory public goods games," Journal of Public Economics, Elsevier, vol. 89(8), pages 1437-1455, August.
  6. repec:cup:cbooks:9780521555838 is not listed on IDEAS
  7. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
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