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

Author

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  • Thomas Riechmann

    (University of Magedeburg)

  • Joachim Weimann

    (University of Magdeburg)

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 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.

Suggested Citation

  • Thomas Riechmann & Joachim Weimann, 2004. "Competition as a Coordination Device. Experimental Evidence from a Minimum Effort Coordination Game," Game Theory and Information 0405011, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpga:0405011
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    coordination failure; team production; competition;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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