Coordination, Efficiency and Pre-Play Communication with Forgone Costly Messages
Peter H. Kriss
University of Pittsburgh - Department of Economics
Roberto A. Weber
University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)
October 1, 2011
University of Zurich Department of Economics Working Paper No. 34
We examine communication in a two-player coordination game with Pareto-ranked equilibria. Prior research demonstrates that efficient coordination is difficult without communication but obtains regularly with (mandatory) costless pre-play messages. In a laboratory experiment, we introduce two realistic features of communication by making the sending of messages optional and costly. Even small costs dramatically reduce message use, but efficient coordination of actions occurs with similar frequency to that observed under costless communication. By varying communication costs we corroborate several predictions from a theoretical analysis based on forward induction. Our results indicate that, for some levels of communication costs, explicit communication may be unnecessary for efficient coordination; instead, players simply need to know that the option to send messages was available. Thus, the relationship between communication and coordination is more complex than suggested by prior research.
Number of Pages in PDF File: 41
Keywords: Coordination, Communication, Experiment
JEL Classification: C72, C92, D83working papers series
Date posted: November 11, 2011
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