Does Information Transparency Decrease Coordination Failure?

44 Pages Posted: 4 Feb 2009

See all articles by Regina M. Anctil

Regina M. Anctil

University of Minnesota - Twin Cities - Carlson School of Management

John W. Dickhaut

Chapman University (Deceased)

Cathleen A. Johnson

University of Arizona, Philosophy, Politics, Economics and Law Program; Center for Interuniversity Research and Analysis on Organization (CIRANO)

Chandra Kanodia

University of Minnesota - Carlson School of Management

Date Written: December, 18 2008

Abstract

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.

Suggested Citation

Anctil, Regina M. and Dickhaut, John and Johnson, Cathleen Amanda and Johnson, Cathleen Amanda and Kanodia, Chandra, Does Information Transparency Decrease Coordination Failure? (December, 18 2008). Available at SSRN: https://ssrn.com/abstract=1317835 or http://dx.doi.org/10.2139/ssrn.1317835

Regina M. Anctil

University of Minnesota - Twin Cities - Carlson School of Management ( email )

321 19th Avenue South
Department of Accounting
Minneapolis, MN 55455
United States
612-624-1050 (Phone)
612-626-1335 (Fax)

John Dickhaut (Contact Author)

Chapman University (Deceased)

Cathleen Amanda Johnson

Center for Interuniversity Research and Analysis on Organization (CIRANO)

Montreal, Quebec H3C 3J7
Canada

University of Arizona, Philosophy, Politics, Economics and Law Program ( email )

Social and Behavioral Sciences
Tucson, AZ 85721-0108
United States

Chandra Kanodia

University of Minnesota - Carlson School of Management ( email )

321 19th Avenue South
674 Management and Economics
Minneapolis, MN 55455
United States
612-624-6880 (Phone)
612-626-7795 (Fax)

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