Does Information Transparency Decrease Coordination Failure?
Regina M. Anctil
University of Minnesota - Twin Cities - Carlson School of Management
John W. Dickhaut
Chapman University (Deceased)
Cathleen A. Johnson
University of Arizona - Department of Economics; Center for Interuniversity Research and Analysis on Organization (CIRANO)
University of Minnesota - Carlson School of Management
December, 18 2008
This study experimentally tests the effect of information transparency on the probability of coordination failure in global games with finite signals. Prior theory has shown that in global games with unique equilibrium, the effect of information transparency is ambiguous. We find that in global games where the signal space is finite, increased transparency has two effects. First, increasing the level of transparency usually destroys uniqueness and precipitates multiple equilibria, so that the effect of transparency on coordination depends crucially upon which equilibrium is actually attained. Second, the level of transparency determines which of these equilibria is risk dominant. We find that increased transparency facilitates coordination only if it switches the risk-dominant equilibrium from the secure equilibrium to the efficient equilibrium. When the converse is true, improved transparency can be dysfunctional because it increases the probability of coordination failure.
Number of Pages in PDF File: 44working papers series
Date posted: February 4, 2009
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