Coordination failure caused by sunspots

Julie  Beugnot; Zeynep  Gürgüç; Frederik Roose Øvlisen; Michael M. W.  Roos

Coordination failure caused by sunspots

Julie Beugnot, Zeynep Gürgüç , Frederik Roose Øvlisen, Michael M. W. Roos

Department of Economics

3 Citations (Scopus)

Abstract

In a coordination game with Pareto-ranked equilibria, we study whether a sunspot can lead to either coordination on an inferior equilibrium (mis-coordination) or to out-of equilibrium behavior (dis-coordination). While much of the literature searches for mechanisms to attain coordination on the efficient equilibrium, we consider sunspots as a potential reason for coordination failure. We conduct an experiment with a three player 2x2x2 game in which coordination on the efficient equilibrium is easy and should normally occur. In the control session, we find almost perfect coordination on the payoff-dominant equilibrium, but in the sunspot treatment, dis-coordination is frequent. Sunspots lead to significant inefficiency, and we conclude that sunspots can indeed cause coordination failure.

Original language	English
Journal	Economics Bulletin
Volume	32
Issue number	4
Pages (from-to)	2860-2869
ISSN	1545-2921
Publication status	Published - 2012

Keywords

Faculty of Social Sciences

Cite this

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title = "Coordination failure caused by sunspots",

abstract = "In a coordination game with Pareto-ranked equilibria, we study whether a sunspot can lead to either coordination on an inferior equilibrium (mis-coordination) or to out-of equilibrium behavior (dis-coordination). While much of the literature searches for mechanisms to attain coordination on the efficient equilibrium, we consider sunspots as a potential reason for coordination failure. We conduct an experiment with a three player 2x2x2 game in which coordination on the efficient equilibrium is easy and should normally occur. In the control session, we find almost perfect coordination on the payoff-dominant equilibrium, but in the sunspot treatment, dis-coordination is frequent. Sunspots lead to significant inefficiency, and we conclude that sunspots can indeed cause coordination failure.",

keywords = "Faculty of Social Sciences, sunspots, coordination game, multiple Pareto-ranked equilibria, experiment",

author = "Julie Beugnot and Zeynep G{\"u}rg{\"u}{\c c} and {\O}vlisen, {Frederik Roose} and Roos, {Michael M. W.}",

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TY - JOUR

T1 - Coordination failure caused by sunspots

AU - Beugnot, Julie

AU - Gürgüç , Zeynep

AU - Øvlisen, Frederik Roose

AU - Roos , Michael M. W.

N1 - Jel classification: C9; C7

PY - 2012

Y1 - 2012

N2 - In a coordination game with Pareto-ranked equilibria, we study whether a sunspot can lead to either coordination on an inferior equilibrium (mis-coordination) or to out-of equilibrium behavior (dis-coordination). While much of the literature searches for mechanisms to attain coordination on the efficient equilibrium, we consider sunspots as a potential reason for coordination failure. We conduct an experiment with a three player 2x2x2 game in which coordination on the efficient equilibrium is easy and should normally occur. In the control session, we find almost perfect coordination on the payoff-dominant equilibrium, but in the sunspot treatment, dis-coordination is frequent. Sunspots lead to significant inefficiency, and we conclude that sunspots can indeed cause coordination failure.

AB - In a coordination game with Pareto-ranked equilibria, we study whether a sunspot can lead to either coordination on an inferior equilibrium (mis-coordination) or to out-of equilibrium behavior (dis-coordination). While much of the literature searches for mechanisms to attain coordination on the efficient equilibrium, we consider sunspots as a potential reason for coordination failure. We conduct an experiment with a three player 2x2x2 game in which coordination on the efficient equilibrium is easy and should normally occur. In the control session, we find almost perfect coordination on the payoff-dominant equilibrium, but in the sunspot treatment, dis-coordination is frequent. Sunspots lead to significant inefficiency, and we conclude that sunspots can indeed cause coordination failure.

KW - Faculty of Social Sciences

KW - sunspots

KW - coordination game

KW - multiple Pareto-ranked equilibria

KW - experiment

M3 - Journal article

SN - 1545-2921

VL - 32

SP - 2860

EP - 2869

JO - Economics Bulletin

JF - Economics Bulletin

IS - 4

ER -