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Communication, Leadership and Coordination Failure

Listed author(s):
  • Lu Dong

    (Department of Economics, University of Nottingham)

  • Maria Montero

    ()

    (Department of Economics, University of Nottingham)

  • Alex Possajennikov

    ()

    (Department of Economics, University of Nottingham)

Using experimental methods, this paper investigates the limits of communication and leadership in aiding group coordination in a minimum effort game. Choosing the highest effort is the payoff dominant Nash equilibrium in this game, and communication and leadership are expected to help in coordinating on such an equilibrium. We consider an environment in which the benefits of coordination are low compared to the cost of mis-coordination. In this environment, players converge to the most inefficient equilibrium in the absence of a leader. We look at two types of leaders: a cheap-talk leader-communicator who suggests an effort level but is free to choose a different level from the one suggested, and a first-mover leader whose choice of effort is observed by the rest of the group. We study whether leadership can prevent coordination failure and whether leadership allows coordination on a higher effort after a history of coordination fail- ure. We find that in this tough environment both types of leadership are insufficient to escape from the low-effort equilibrium but leadership has some (limited) ability to prevent coordination failure. With the help of the strategy method for the followers' responses we find that the main reason for the persistence of coordination failure in this environment is the presence of followers who do not follow (or would not have followed) the leader.

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File URL: http://www.nottingham.ac.uk/cedex/documents/papers/cedex-discussion-paper-2015-17.pdf
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Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2015-17.

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Date of creation: 2015
Handle: RePEc:not:notcdx:2015-17
Contact details of provider: Postal:
School of Economics University of Nottingham University Park Nottingham NG7 2RD

Phone: (44) 0115 951 5620
Fax: (0115) 951 4159
Web page: http://www.nottingham.ac.uk/economics/cedex/

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