A Road to Efficiency through Communication and Commitment
71 Pages Posted: 11 May 2016 Last revised: 14 Jan 2020
Date Written: January 6, 2020
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: Suggested Citation