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On the Role of Non-equilibrium Focal Points as Coordination Devices

  • Antoni Bosch-Dom�nech

    ()

    (Universitat Pompeu Fabra and CREA, Barcelona)

  • Nicolaas J. Vriend

    ()

    (Queen Mary, University of London)

Considering a pure coordination game with a large number of equivalent equilibria, we argue, first, that a focal point that is itself not a Nash equilibrium and is Pareto dominated by all Nash equilibria, may attract the players' choices. Second, we argue that such a non-equilibrium focal point may act as an equilibrium selection device that the players use to coordinate on a closely related small subset of Nash equilibria. We present theoretical as well as experimental support for these two new roles of focal points as coordination devices.

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Paper provided by Queen Mary University of London, School of Economics and Finance in its series Working Papers with number 621.

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Date of creation: Feb 2008
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Handle: RePEc:qmw:qmwecw:wp621
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