IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/102213.html
   My bibliography  Save this paper

The Power of Focal Points is Strong: Coordination Games with Labels and Payoffs

Author

Listed:
  • Bodoff, David

Abstract

People’s ability to coordinate on salient labels has been widely reported since Schelling. However, it is not known how players behave when label salience conflicts with payoff dominance. We consider such games by independently varying the two elements, focusing especially on cases where the two criteria conflict. We also introduce a new form of the game, in which players choose labeled strategies in response to a stimulus. In games with no reference stimulus, behavior is consistent with a simple model, according to which strategic players assume their naïve counterparts choose the higher payoff. In games with a reference stimulus, behavior is consistent with a model in which strategic players assume their naïve counterparts choose the label that is more salient to them, except perhaps where the two labels’ salience are very similar, in which case the higher payoff is chosen. A key finding is that in the presence of a stimulus, play is best explained by a model in which players choose according to label salience, even against the combination of payoff and risk dominance.

Suggested Citation

  • Bodoff, David, 2020. "The Power of Focal Points is Strong: Coordination Games with Labels and Payoffs," MPRA Paper 102213, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:102213
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/102213/1/MPRA_paper_102213.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Vincent P. Crawford & Uri Gneezy & Yuval Rottenstreich, 2008. "The Power of Focal Points Is Limited: Even Minute Payoff Asymmetry May Yield Large Coordination Failures," American Economic Review, American Economic Association, vol. 98(4), pages 1443-1458, September.
    2. Amanda Spink & Tefko Saracevic, 1997. "Interaction in information retrieval: Selection and effectiveness of search terms," Journal of the American Society for Information Science, Association for Information Science & Technology, vol. 48(8), pages 741-761, August.
    3. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, September.
    4. Andrew Colman & Michael Bacharach, 1997. "Payoff Dominance And The Stackelberg Heuristic," Theory and Decision, Springer, vol. 43(1), pages 1-19, July.
    5. Stahl Dale O. & Wilson Paul W., 1995. "On Players' Models of Other Players: Theory and Experimental Evidence," Games and Economic Behavior, Elsevier, vol. 10(1), pages 218-254, July.
    6. Jack Ochs, 1990. "The Coordination Problem in Decentralized Markets: An Experiment," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 545-559.
    7. Cooper, Russell, et al, 1990. "Selection Criteria in Coordination Games: Some Experimental Results," American Economic Review, American Economic Association, vol. 80(1), pages 218-233, March.
    8. Sugden, Robert, 1995. "A Theory of Focal Points," Economic Journal, Royal Economic Society, vol. 105(430), pages 533-550, May.
    9. Mehta, Judith & Starmer, Chris & Sugden, Robert, 1994. "The Nature of Salience: An Experimental Investigation of Pure Coordination Games," American Economic Review, American Economic Association, vol. 84(3), pages 658-673, June.
    10. Colin F. Camerer & Teck-Hua Ho & Juin-Kuan Chong, 2004. "A Cognitive Hierarchy Model of Games," The Quarterly Journal of Economics, Oxford University Press, vol. 119(3), pages 861-898.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bosch-Domènech, Antoni & Vriend, Nicolaas J., 2013. "On the role of non-equilibrium focal points as coordination devices," Journal of Economic Behavior & Organization, Elsevier, vol. 94(C), pages 52-67.
    2. Leland, Jonathan W. & Schneider, Mark, 2018. "A theory of focal points in 2 × 2 games," Journal of Economic Psychology, Elsevier, vol. 65(C), pages 75-89.
    3. Nicolas Bardsley & Judith Mehta & Chris Starmer & Robert Sugden, 2006. "The Nature of Salience Revisited: Cognitive Hierarchy Theory versus Team Reasoning," Discussion Papers 2006-17, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    4. Külpmann, Philipp & Khantadze, Davit, 2016. "Identifying the reasons for coordination failure in a laboratory experiment," Center for Mathematical Economics Working Papers 567, Center for Mathematical Economics, Bielefeld University.
    5. Colman, Andrew M. & Stirk, Jonathan A., 1998. "Stackelberg reasoning in mixed-motive games: An experimental investigation," Journal of Economic Psychology, Elsevier, vol. 19(2), pages 279-293, April.
    6. Nicholas Bardsley & Judith Mehta & Chris Starmer & Robert Sugden, 2010. "Explaining Focal Points: Cognitive Hierarchy Theory "versus" Team Reasoning," Economic Journal, Royal Economic Society, vol. 120(543), pages 40-79, March.
    7. Bardsley, Nicholas & Ule, Aljaž, 2017. "Focal points revisited: Team reasoning, the principle of insufficient reason and cognitive hierarchy theory," Journal of Economic Behavior & Organization, Elsevier, vol. 133(C), pages 74-86.
    8. Elten, Jonas van & Penczynski, Stefan P., 2020. "Coordination games with asymmetric payoffs: An experimental study with intra-group communication," Journal of Economic Behavior & Organization, Elsevier, vol. 169(C), pages 158-188.
    9. Sitzia, Stefania & Zheng, Jiwei, 2019. "Group behaviour in tacit coordination games with focal points – an experimental investigation," Games and Economic Behavior, Elsevier, vol. 117(C), pages 461-478.
    10. Alberti, Federica & Sugden, Robert & Tsutsui, Kei, 2012. "Salience as an emergent property," Journal of Economic Behavior & Organization, Elsevier, vol. 82(2), pages 379-394.
    11. Faillo, Marco & Smerilli, Alessandra & Sugden, Robert, 2017. "Bounded best-response and collective-optimality reasoning in coordination games," Journal of Economic Behavior & Organization, Elsevier, vol. 140(C), pages 317-335.
    12. López-Pérez, Raúl & Pintér, Ágnes & Kiss, Hubert J., 2015. "Does payoff equity facilitate coordination? A test of Schelling's conjecture," Journal of Economic Behavior & Organization, Elsevier, vol. 117(C), pages 209-222.
    13. Lisa Bruttel & Tim Friehe, 2013. "Make Humans Randomize," Working Paper Series of the Department of Economics, University of Konstanz 2013-20, Department of Economics, University of Konstanz.
    14. Marco Faillo & Alessandra Smerilli & Robert Sugden, 2016. "Can a single theory explain coordination? An experiment on alternative modes of reasoning and the conditions under which they are used," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 16-01, School of Economics, University of East Anglia, Norwich, UK..
    15. Swee Hoon Chuah & Robert Hoffmann & Lee Chew Ging, 2004. "Coordination and Incomplete Information: an Experimental Study," Occasional Papers 7, Industrial Economics Division.
    16. Stefania Sitzia & Jiwei Zheng, 2017. "Group behaviour in tacit coordination games with focal points: An experimental investigation," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 17-02, School of Economics, University of East Anglia, Norwich, UK..
    17. Willemien Kets, 2007. "The minority game: An economics perspective," Papers 0706.4432, arXiv.org.
    18. Stefania Sitzia & Jiwei Zheng, 2018. "Group behaviour in tacit coordination games with focal points: An experimental investigation," Working Paper series, University of East Anglia, Centre for Behavioural and Experimental Social Science (CBESS) 17-02R, School of Economics, University of East Anglia, Norwich, UK..
    19. repec:uea:wcbess:13-02 is not listed on IDEAS
    20. Irenaeus Wolff, 2017. "Lucky Numbers in Simple Games," TWI Research Paper Series 107, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    21. Isoni, Andrea & Poulsen, Anders & Sugden, Robert & Tsutsui, Kei, 2019. "Focal points and payoff information in tacit bargaining," Games and Economic Behavior, Elsevier, vol. 114(C), pages 193-214.

    More about this item

    Keywords

    coordination games; focal points; cognitive hierarchy;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:102213. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.