On Smiles, Winks and Handshakes as Coordination Devices
University of St. Andrews - School of Economics and Finance; Institute for the Study of Labor (IZA)
University of Magdeburg
Nicolaas J. Vriend
Queen Mary, University of London - Department of Economics
The Economic Journal, Vol. 119, No. 537, pp. 826-854, April 2009
In an experimental study we examine a variant of the minimum effort game, a coordination game with Pareto ranked equilibria and risk considerations pointing to the least efficient equilibrium. We focus on the question whether simple cues such as smiles, winks and handshakes could be recognised and employed by the players as a tell-tale sign of each other's trustworthiness, thus enabling them to coordinate on the more risky but more rewarding Pareto efficient equilibrium. Our experimental results show that such cues may indeed play a role as coordination devices as their information value is significant and substantial.
Number of Pages in PDF File: 29Accepted Paper Series
Date posted: April 27, 2009
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