Discontinuous and Continuous Stochastic Choice and Coordination in the Lab
(2020) In Working Papers- Abstract
- Coordination games have multiple equilibria under complete information. However, recent theoretical advances show that if players are uncertain but can acquire information about a payoff-relevant state of the world, the number of equilibria depends on whether they can implement strategies (stochastic choice rules) discontinuous in the state. We experimentally test these results in a two-player investment game. Through a minimal visual variation in the design (our treatment) we prompt participants to play strategies whereby their probability to invest 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... (More)
- Coordination games have multiple equilibria under complete information. However, recent theoretical advances show that if players are uncertain but can acquire information about a payoff-relevant state of the world, the number of equilibria depends on whether they can implement strategies (stochastic choice rules) discontinuous in the state. We experimentally test these results in a two-player investment game. Through a minimal visual variation in the design (our treatment) we prompt participants to play strategies whereby their probability to invest 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—in¬¬ which case there are multiple equilibria—average behavior is closer to the payoff-dominant equilibrium strategy. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies. (Less)
Please use this url to cite or link to this publication:
https://lup.lub.lu.se/record/54a52033-37f1-447c-bb9c-e305964b4bf7
- author
- Goryunov, Maxim and Rigos, Alexandros LU
- organization
- publishing date
- 2020-08-31
- type
- Working paper/Preprint
- publication status
- published
- subject
- keywords
- Coordination, Global games, Information acquisition, Continous stochastic choice, Visual information, Experiment, Perception, C72, C92, D83
- in
- Working Papers
- issue
- 2020:17
- pages
- 59 pages
- external identifiers
-
- scopus:85139294640
- language
- English
- LU publication?
- yes
- id
- 54a52033-37f1-447c-bb9c-e305964b4bf7
- alternative location
- https://swopec.hhs.se/lunewp/abs/lunewp2020_017.htm
- date added to LUP
- 2020-09-02 11:28:33
- date last changed
- 2022-12-09 10:59:47
@misc{54a52033-37f1-447c-bb9c-e305964b4bf7,
abstract = {{Coordination games have multiple equilibria under complete information. However, recent theoretical advances show that if players are uncertain but can acquire information about a payoff-relevant state of the world, the number of equilibria depends on whether they can implement strategies (stochastic choice rules) discontinuous in the state. We experimentally test these results in a two-player investment game. Through a minimal visual variation in the design (our treatment) we prompt participants to play strategies whereby their probability to invest 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—in¬¬ which case there are multiple equilibria—average behavior is closer to the payoff-dominant equilibrium strategy. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies.}},
author = {{Goryunov, Maxim and Rigos, Alexandros}},
keywords = {{Coordination; Global games; Information acquisition; Continous stochastic choice; Visual information; Experiment; Perception; C72; C92; D83}},
language = {{eng}},
month = {{08}},
note = {{Working Paper}},
number = {{2020:17}},
series = {{Working Papers}},
title = {{Discontinuous and Continuous Stochastic Choice and Coordination in the Lab}},
url = {{https://swopec.hhs.se/lunewp/abs/lunewp2020_017.htm}},
year = {{2020}},
}