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Competition as a Coordination Device. Experimental Evidence from a Minimum Effort Coordination Game

  • Thomas Riechmann

    (University of Magedeburg)

  • Joachim Weimann

    (University of Magdeburg)

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 that foster efficient coordination of individual economic plans. In this paper, we introduce such a rather classical 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 mechanism of (inter-group) competition.

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Paper provided by EconWPA in its series Game Theory and Information with number 0405011.

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Length: 25 pages
Date of creation: 26 May 2004
Date of revision:
Handle: RePEc:wpa:wuwpga:0405011
Note: Type of Document - pdf; pages: 25
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  1. Van Huyck John B. & Battalio Raymond C. & Beil Richard O., 1993. "Asset Markets as an Equilibrium Selection Mechanism: Coordination Failure, Game Form Auctions, and Tacit Communication," Games and Economic Behavior, Elsevier, vol. 5(3), pages 485-504, July.
  2. Nalbantian, Haig R & Schotter, Andrew, 1997. "Productivity under Group Incentives: An Experimental Study," American Economic Review, American Economic Association, vol. 87(3), pages 314-41, June.
  3. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  4. Battalio, Raymond & Samuelson, Larry & Van Huyck, John, 2001. "Optimization Incentives and Coordination Failure in Laboratory Stag Hunt Games," Econometrica, Econometric Society, vol. 69(3), pages 749-64, May.
  5. Charles A. Holt & Jacob K. Goeree, . "An Experimental Study of Costly Coordination," Virginia Economics Online Papers 326, University of Virginia, Department of Economics.
  6. Berninghaus, Siegfried K. & Ehrhart, Karl-Martin, 1998. "Time horizon and equilibrium selection in tacit coordination games: Experimental results," Journal of Economic Behavior & Organization, Elsevier, vol. 37(2), pages 231-248, October.
  7. Sandler, Todd, 1998. "Global and Regional Public Goods: A Prognosis for Collective Action," Staff General Research Papers 1225, Iowa State University, Department of Economics.
  8. Brosig, Jeannette, 2006. "Communication channels and induced behavior," MPRA Paper 14035, University Library of Munich, Germany.
  9. Jeannette Brosig & Axel Ockenfels & Joachim Weimann, 2002. "The Effect of Communication Media on Cooperation," Papers on Strategic Interaction 2002-17, Max Planck Institute of Economics, Strategic Interaction Group.
  10. 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.
  11. Gary Bornstein & Uri Gneezy & Rosemarie Nagel, 1999. "The effect of intergroup competition on group coordination: An experimental study," Economics Working Papers 393, Department of Economics and Business, Universitat Pompeu Fabra.
  12. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
  13. Van Huyck, John B & Battalio, Raymond C & Beil, Richard O, 1990. "Tacit Coordination Games, Strategic Uncertainty, and Coordination Failure," American Economic Review, American Economic Association, vol. 80(1), pages 234-48, March.
  14. repec:tpr:qjecon:v:107:y:1992:i:2:p:739-71 is not listed on IDEAS
  15. repec:tpr:qjecon:v:111:y:1996:i:1:p:165-94 is not listed on IDEAS
  16. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521578967.
  17. D. Foster & P. Young, 2010. "Stochastic Evolutionary Game Dynamics," Levine's Working Paper Archive 493, David K. Levine.
  18. 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.
  19. Cooper, Russell, 1994. "Equilibrium Selection in Imperfectly Competitive Economies with Multiple Equilibria," Economic Journal, Royal Economic Society, vol. 104(426), pages 1106-22, September.
  20. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
  21. Samuel Bowles & Herbert Gintis, 1993. "The Revenge of Homo Economicus: Contested Exchange and the Revival of Political Economy," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 83-102, Winter.
  22. P. Young, 1999. "The Evolution of Conventions," Levine's Working Paper Archive 485, David K. Levine.
  23. Riechmann, Thomas & Weimann, Joachim, 2008. "Competition as a coordination device: Experimental evidence from a minimum effort coordination game," European Journal of Political Economy, Elsevier, vol. 24(2), pages 437-454, June.
  24. Berninghaus, Siegfried K. & Ehrhart, Karl-Martin, 2001. "Coordination and information: recent experimental evidence," Economics Letters, Elsevier, vol. 73(3), pages 345-351, December.
  25. C. Monica Capra & Charles A. Holt, 1999. "Coordination," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 630-636, January.
  26. Christiane Clemens & Thomas Riechmann, 2003. "Relative Payoffs and Evolutionary Spite --- Evolutionary Equilibria in Games with Finitely Many Players," Computing in Economics and Finance 2003 98, Society for Computational Economics.
  27. Crawford, Vincent P., 1991. "An "evolutionary" interpretation of Van Huyck, Battalio, and Beil's experimental results on coordination," Games and Economic Behavior, Elsevier, vol. 3(1), pages 25-59, February.
  28. Oliver E. Williamson, 1993. "Contested Exchange versus the Governance of Contractual Relations," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 103-108, Winter.
  29. repec:tpr:qjecon:v:103:y:1988:i:3:p:441-63 is not listed on IDEAS
  30. 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.
  31. Blume, Andreas & Ortmann, Andreas, 2007. "The effects of costless pre-play communication: Experimental evidence from games with Pareto-ranked equilibria," Journal of Economic Theory, Elsevier, vol. 132(1), pages 274-290, January.
  32. Joseph E. Stiglitz, 1993. "Post Walrasian and Post Marxian Economics," Journal of Economic Perspectives, American Economic Association, vol. 7(1), pages 109-114, Winter.
  33. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521570176.
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