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On the role of non-equilibrium focal points as coordination devices

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 Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1064.

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Date of creation: Feb 2008
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Handle: RePEc:upf:upfgen:1064
Contact details of provider: Web page: http://www.econ.upf.edu/

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  19. Carlos Alós-Ferrer & Christoph Kuzmics, 2008. "Hidden Symmetries and Focal Points," TWI Research Paper Series 35, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
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