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When Are Nash Equilibria Self-Enforcing? An Experimental Analysis

  • Kenneth Clark

    (University of Manchester)

  • Stephen Kay

    (University of Manchester)

  • Martin Sefton

    (University of Manchester)

We investigate the effect of non-binding pre-play communication in experiments with simple two-player coordination games. We reproduce the results of other studies in which play converges to a Pareto-dominated equilibrium in the absence of communication, and communication moves outcomes in the direction of the Pareto-dominant equilibrium. However, we provide new results which show that the effectiveness of communication is sensitive to the structure of payoffs. Our results support an argument put forward by Aumann: agreements to play a Nash equilibrium are fragile when players have a strict preference over their opponent's strategy choice. We also find that informative communication does not necessarily lead to the Pareto-dominant equilibrium.

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Paper provided by EconWPA in its series Experimental with number 9707001.

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Length: 33 pages
Date of creation: 08 Jul 1997
Date of revision:
Handle: RePEc:wpa:wuwpex:9707001
Note: Type of Document - WordPerfect; pages: 33 ; figures: included. We never published this piece and now we would like to reduce our mailing and xerox cost by posting it.
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  1. COOPER, R. & DEJONG, D.V. & FORSYTHE, R. & Tom Ross, 1989. "Communication In Coordination Games," Carleton Industrial Organization Research Unit (CIORU) 89-07, Carleton University, Department of Economics.
  2. Straub, Paul G., 1995. "Risk dominance and coordination failures in static games," The Quarterly Review of Economics and Finance, Elsevier, vol. 35(4), pages 339-363.
  3. Cooper, Russell, et al, 1990. "Selection Criteria in Coordination Games: Some Experimental Results," American Economic Review, American Economic Association, vol. 80(1), pages 218-33, March.
  4. repec:tpr:qjecon:v:107:y:1992:i:2:p:739-71 is not listed on IDEAS
  5. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
  6. Ferreira, Jos e Luis, 1996. "A Communication-Proof Equilibrium Concept," Journal of Economic Theory, Elsevier, vol. 68(1), pages 249-257, January.
  7. Harsanyi John C., 1995. "A New Theory of Equilibrium Selection for Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 10(2), pages 318-332, August.
  8. Roth, Alvin E, 1980. "Values for Games without Sidepayments: Some Difficulties with Current Concepts," Econometrica, Econometric Society, vol. 48(2), pages 457-65, March.
  9. Farrell, Joseph, 1988. "Communication, coordination and Nash equilibrium," Economics Letters, Elsevier, vol. 27(3), pages 209-214.
  10. 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, June.
  11. Joseph Farrell & Matthew Rabin, 1996. "Cheap Talk," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 103-118, Summer.
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