A Road to Efficiency through Communication and Commitment

71 Pages Posted: 11 May 2016 Last revised: 14 Jan 2020

See all articles by Ala Avoyan

Ala Avoyan

Indiana University

Joao Ramos

Marshall School of Business - University of Southern California

Date Written: January 6, 2020

Abstract

We experimentally examine the efficacy of a novel pre-play institution introduced by Calcagno et al. (2014) in a well-known coordination game—the minimum-effort game—in which coordination failures are a robust and persistent phenomenon. This new institution allows agents to communicate while incrementally committing to their words, leading to a sharp theoretical prediction: the efficient outcome is uniquely selected in the extended coordination game. Commitment-enhanced communication significantly increases subjects’ payoffs, and achieves efficiency levels considerably higher than non-binding communication. We document that commitment alters communication, and that subjects behave in a forward-thinking and myopically suboptimal manner at the beginning of their interaction and then myopically best respond as the deadline looms.

Keywords: Coordination, Revision Games, Dynamic Games, Continuous-time Experiments

JEL Classification: C73, C92, P41

Suggested Citation

Avoyan, Ala and Ramos, Joao, A Road to Efficiency through Communication and Commitment (January 6, 2020). Available at SSRN: https://ssrn.com/abstract=2777644 or http://dx.doi.org/10.2139/ssrn.2777644

Ala Avoyan (Contact Author)

Indiana University ( email )

Bloomington, IN
United States

Joao Ramos

Marshall School of Business - University of Southern California ( email )

701 Exposition Boulevard, STE 205
Los Angeles, CA 90089-1422
United States

HOME PAGE: http://www.joaoaramos.com/

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