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Discontinuous and continuous stochastic choice and coordination in the lab

Goryunov, Maxim and Rigos, Alexandros LU (2022) In Journal of Economic Theory 206.
Abstract

We experimentally test theoretical predictions on equilibrium selection in a two-player coordination (investment) game. Through a minimal visual variation, our design prompts participants to play strategies whereby investing probability is either continuous or discontinuous in the payoff-relevant state. When participants use continuous strategies, average behavior is consistent with play in the risk-dominant equilibrium, the unique theoretical prediction. When they use discontinuous strategies, average behavior is closer to the payoff-dominant equilibrium strategy. In this case, the theory predicts multiple equilibria, for which we find no support. Additionally, we extend the theory to heterogeneous populations: the set of equilibria... (More)

We experimentally test theoretical predictions on equilibrium selection in a two-player coordination (investment) game. Through a minimal visual variation, our design prompts participants to play strategies whereby investing probability is either continuous or discontinuous in the payoff-relevant state. When participants use continuous strategies, average behavior is consistent with play in the risk-dominant equilibrium, the unique theoretical prediction. When they use discontinuous strategies, average behavior is closer to the payoff-dominant equilibrium strategy. In this case, the theory predicts multiple equilibria, for which we find no support. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies.

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type
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publication status
published
subject
keywords
Continuous stochastic choice, Coordination, Global games, Information acquisition, Laboratory experiment, Perception
in
Journal of Economic Theory
volume
206
article number
105557
publisher
Elsevier
external identifiers
  • scopus:85139294640
ISSN
0022-0531
DOI
10.1016/j.jet.2022.105557
language
English
LU publication?
yes
additional info
Funding Information: We thank Pol Campos-Mercade, Erik Mohlin, Stephen Morris, Alexander Nesterov, Jakub Steiner, Petra Thiemann, Isabel Trevino, and Erik Wengström for discussions and suggestions at various stages of this project, as well as the Editor, Faruk Gul, an anonymous associate editor, and two anonymous referees for their constructive comments. We also thank audiences at LGTC2019, Lisbon Meetings 2019, the Fall 2019 CNEE Workshop, the 2021 workshop on Attention in Decision Making in Lund, and seminar participants at Edinburgh and Lund. Goryunov is grateful to CERGE-EI Foundation for the Career Integration Fellowship and to Nazarbayev University for the support under FDCRGP, grant reference 021220FD4751 . Rigos is grateful to Erik Mohlin and Handelsbankens Forskningsstiftelser (grant # P2016-0079:1 ) for funding. Funding Information: We thank Pol Campos-Mercade, Erik Mohlin, Stephen Morris, Alexander Nesterov, Jakub Steiner, Petra Thiemann, Isabel Trevino, and Erik Wengström for discussions and suggestions at various stages of this project, as well as the Editor, Faruk Gul, an anonymous associate editor, and two anonymous referees for their constructive comments. We also thank audiences at LGTC2019, Lisbon Meetings 2019, the Fall 2019 CNEE Workshop, the 2021 workshop on Attention in Decision Making in Lund, and seminar participants at Edinburgh and Lund. Goryunov is grateful to CERGE-EI Foundation for the Career Integration Fellowship and to Nazarbayev University for the support under FDCRGP, grant reference 021220FD4751. Rigos is grateful to Erik Mohlin and Handelsbankens Forskningsstiftelser (grant #P2016-0079:1) for funding. Publisher Copyright: © 2022 The Author(s)
id
0d36befb-928b-4794-a0bd-5e60e5401b67
date added to LUP
2023-08-15 13:17:55
date last changed
2023-08-15 14:45:12
@article{0d36befb-928b-4794-a0bd-5e60e5401b67,
  abstract     = {{<p>We experimentally test theoretical predictions on equilibrium selection in a two-player coordination (investment) game. Through a minimal visual variation, our design prompts participants to play strategies whereby investing probability is either continuous or discontinuous in the payoff-relevant state. When participants use continuous strategies, average behavior is consistent with play in the risk-dominant equilibrium, the unique theoretical prediction. When they use discontinuous strategies, average behavior is closer to the payoff-dominant equilibrium strategy. In this case, the theory predicts multiple equilibria, for which we find no support. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies.</p>}},
  author       = {{Goryunov, Maxim and Rigos, Alexandros}},
  issn         = {{0022-0531}},
  keywords     = {{Continuous stochastic choice; Coordination; Global games; Information acquisition; Laboratory experiment; Perception}},
  language     = {{eng}},
  publisher    = {{Elsevier}},
  series       = {{Journal of Economic Theory}},
  title        = {{Discontinuous and continuous stochastic choice and coordination in the lab}},
  url          = {{http://dx.doi.org/10.1016/j.jet.2022.105557}},
  doi          = {{10.1016/j.jet.2022.105557}},
  volume       = {{206}},
  year         = {{2022}},
}