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Promoting coordination in summary-statistic games

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  • Dominik Erharter

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Abstract

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.

Suggested Citation

  • Dominik Erharter, 2013. "Promoting coordination in summary-statistic games," Working Papers 2013-28, Faculty of Economics and Statistics, University of Innsbruck.
  • Handle: RePEc:inn:wpaper:2013-28
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    References listed on IDEAS

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    More about this item

    Keywords

    adaptive learning; Markov decision process; coordination failure; order-statistic game;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law

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