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Competition as a Coordination Device

Author

Listed:
  • Joachim Weimann
  • Thomas Riechmann

Abstract

The problem of coordination failure, particularly in "team production" situations, is central to a large number of mircroeconomic as well as macroeconomic models. As this type of inefficient coordination poses a severe economic problem, there is a need for institutions fostering efficient coordination of individual economic plans. In this paper, we introduce a rather classical such economic institution: Competition. In a series of laboratory experiments, we reveal that the true reason for coordination failure is strategic uncertainty which can be reduced almost completely by introducing a appropriately designed meachnism of (inter-group) competition

Suggested Citation

  • Joachim Weimann & Thomas Riechmann, 2004. "Competition as a Coordination Device," Computing in Economics and Finance 2004 196, Society for Computational Economics.
  • Handle: RePEc:sce:scecf4:196
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    Citations

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    Cited by:

    1. Thomas Riechmann, 2005. "Dynamic Behavior in Minimum Effort Coordination Games - Some Theory of Group Size and Inter-Group Competition as Coordination Devices," Game Theory and Information 0503010, EconWPA.
    2. Daniel Zizzo, 2011. "You are not in my boat: common fate and discrimination against outgroup members," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 58(1), pages 91-103, March.
    3. Gunnthorsdottir, Anna & Vragov, Roumen & Mccabe, Kevin, 2007. "The meritocracy as a mechanism to overcome social dilemmas," MPRA Paper 2454, University Library of Munich, Germany.

    More about this item

    Keywords

    coordination failure; team production; competition;

    JEL classification:

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

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