Coordination failure caused by sunspots
Author(s)
Gurguc, Zeynep
Beugnot, Julie
Øvlisen, Frederik
Roos, Michael
Type
Journal Article
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.
Date Issued
2012-10-13
Date Acceptance
2012-10-12
Citation
Economics Bulletin, 2012, 32 (4), pp.2860-2869
ISSN
1545-2921
Publisher
Economics Bulletin
Start Page
2860
End Page
2869
Journal / Book Title
Economics Bulletin
Volume
32
Issue
4
Copyright Statement
© 2012 The Author(s)
Subjects
Economics
14 Economics
Publication Status
Published
Date Publish Online
2012-10-13