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Promoting coordination in summary-statistic games

  • Dominik Erharter

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    This paper studies how external incentives can help agents to coordinate in summary-statistic games. Agents follow a myopic best-reply rule and face a trade-off between efficiency and strategic uncertainty. A principal can help agents to coordinate on the Pareto optimal equilibrium by monitoring an appropriate number of agents. The optimal monitoring policy is 'minimally-invasive' - for every strategy profile of the agents, the principal either monitors just enough agents to make high effort a best-reply or does not monitor at all. Furthermore, given the principal's payoffs are supermodular and increasing at an increasing rate, the optimal monitoring policy is monotone in the number of agents who choose high effort.

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    File URL: http://eeecon.uibk.ac.at/wopec2/repec/inn/wpaper/2013-28.pdf
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    Paper provided by Faculty of Economics and Statistics, University of Innsbruck in its series Working Papers with number 2013-28.

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    Length: 43 pages
    Date of creation: Oct 2013
    Date of revision:
    Handle: RePEc:inn:wpaper:2013-28
    Contact details of provider: Postal: Universitätsstraße 15, A - 6020 Innsbruck
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    Web page: http://www.uibk.ac.at/fakultaeten/volkswirtschaft_und_statistik/index.html.en
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    1. Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1991. "Strategic Uncertainty, Equilibrium Selection, and Coordination Failure in Average Opinion Games," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 885-910, August.
    2. Carlos Alós-Ferrer & Ana Ania, 2005. "The evolutionary stability of perfectly competitive behavior," Economic Theory, Springer, vol. 26(3), pages 497-516, October.
    3. Roberto A. Weber, 2006. "Managing Growth to Achieve Efficient Coordination in Large Groups," American Economic Review, American Economic Association, vol. 96(1), pages 114-126, March.
    4. Kim, Youngse, 1996. "Equilibrium Selection inn-Person Coordination Games," Games and Economic Behavior, Elsevier, vol. 15(2), pages 203-227, August.
    5. Giovanna Devetag & Andreas Ortmann, 2007. "When and why? A critical survey on coordination failure in the laboratory," Experimental Economics, Springer, vol. 10(3), pages 331-344, September.
    6. Bergin, James & Lipman, Barton L, 1996. "Evolution with State-Dependent Mutations," Econometrica, Econometric Society, vol. 64(4), pages 943-56, July.
    7. Robles, Jack, 1997. "Evolution and Long Run Equilibria in Coordination Games with Summary Statistic Payoff Technologies," Journal of Economic Theory, Elsevier, vol. 75(1), pages 180-193, July.
    8. Martin K. Jensen, 2006. "Aggregative Games," Discussion Papers 06-10, Department of Economics, University of Birmingham.
    9. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    10. J. B. Van Huyck & R. C. Battalio & R. O. Beil, 2010. "Tacit coordination games, strategic uncertainty, and coordination failure," Levine's Working Paper Archive 661465000000000393, David K. Levine.
    11. Martin Jensen, 2010. "Aggregative games and best-reply potentials," Economic Theory, Springer, vol. 43(1), pages 45-66, April.
    12. V. Crawford, 2010. "Adaptive Dynamics in Coordination Games," Levine's Working Paper Archive 404, David K. Levine.
    13. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
    14. Bryant, John, 1983. "A Simple Rational Expectations Keynes-Type Model," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 525-28, August.
    15. Devetag, Giovanna, 2005. "Precedent transfer in coordination games: An experiment," Economics Letters, Elsevier, vol. 89(2), pages 227-232, November.
    16. Ellison, Glenn, 2000. "Basins of Attraction, Long-Run Stochastic Stability, and the Speed of Step-by-Step Evolution," Review of Economic Studies, Wiley Blackwell, vol. 67(1), pages 17-45, January.
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