Abstract
We investigate experimentally the conditions under which bounded best-response and collective-optimality reasoning are used in coordination games. Using level-k and team reasoning theories as exemplars, we study games with three pure-strategy equilibria, two of which are mutually isomorphic. The third is always team-optimal, but whether it is predicted by level-k theory differs across games. We find that collective-optimality reasoning is facilitated if the collectively optimal equilibrium gives more equal payoffs than the others, and is inhibited if that equilibrium is Pareto-dominated by the others, considered separately. We suggest that coordination cannot be explained by a single theory.
Original language | English |
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Pages (from-to) | 317–335 |
Number of pages | 19 |
Journal | Journal of Economic Behavior and Organization |
Volume | 140 |
Early online date | 4 Jun 2017 |
DOIs | |
Publication status | Published - Aug 2017 |
Keywords
- team reasoning
- level-k theory
- coordination games
Profiles
-
Robert Sugden
- School of Economics - Professor of Economics
- Centre for Behavioural and Experimental Social Science - Member
- Centre for Competition Policy - Member
- Behavioural Economics - Member
- Economic Theory - Member
Person: Research Group Member, Research Centre Member, Academic, Teaching & Research