Coordination via correlation: an experimental study

Coordination via correlation: an experimental study We report on an experiment exploring whether and how subjects may learn to use a correlation device to coordinate on a correlated equilibrium of the Battle of the Sexes game which Pareto dominates the mixed-strategy Nash equilibrium of that game. We consider a direct correlation device with messages phrased in terms of players’ actions as well as an indirect device with a priori meaningless messages. According to the revelation principle, it does not matter whether the correlation device is direct or indirect so long as it implements a correlated equilibrium. However, we find that subjects had an easier time coordinating on the efficient correlated equilibrium with a direct rather than an indirect device. Nevertheless, subjects were able to learn to use the indirect device to better coordinate their play. We further find that, when paired with a fixed partner, subjects utilized history-contingent strategies (e.g., “alternation”) as a coordinating device and were more likely to ignore the correlation device in this setting; the fixed-matching protocol can thus serve as a substitute for a correlation device in achieving an efficient coordination outcome. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Economic Theory Springer Journals

Coordination via correlation: an experimental study

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Publisher
Springer Berlin Heidelberg
Copyright
Copyright © 2016 by Springer-Verlag Berlin Heidelberg
Subject
Economics; Economic Theory/Quantitative Economics/Mathematical Methods; Game Theory, Economics, Social and Behav. Sciences; Microeconomics; Public Finance
ISSN
0938-2259
eISSN
1432-0479
D.O.I.
10.1007/s00199-016-0998-8
Publisher site
See Article on Publisher Site

Abstract

We report on an experiment exploring whether and how subjects may learn to use a correlation device to coordinate on a correlated equilibrium of the Battle of the Sexes game which Pareto dominates the mixed-strategy Nash equilibrium of that game. We consider a direct correlation device with messages phrased in terms of players’ actions as well as an indirect device with a priori meaningless messages. According to the revelation principle, it does not matter whether the correlation device is direct or indirect so long as it implements a correlated equilibrium. However, we find that subjects had an easier time coordinating on the efficient correlated equilibrium with a direct rather than an indirect device. Nevertheless, subjects were able to learn to use the indirect device to better coordinate their play. We further find that, when paired with a fixed partner, subjects utilized history-contingent strategies (e.g., “alternation”) as a coordinating device and were more likely to ignore the correlation device in this setting; the fixed-matching protocol can thus serve as a substitute for a correlation device in achieving an efficient coordination outcome.

Journal

Economic TheorySpringer Journals

Published: Sep 15, 2016

References

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