A Road to Efficiency through Communication and Commitment

55 Pages Posted: 11 May 2016 Last revised: 1 Oct 2021

See all articles by Ala Avoyan

Ala Avoyan

Indiana University

Joao Ramos

Marshall School of Business - University of Southern California

Date Written: August 25, 2021

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 robust and persistent. This new institution allows agents to communicate while incrementally committing to their words, leading to a distinct 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 considered in the paper. We document which aspects of the mechanism are critical for its success and the features of the environment to which the outcomes are invariant.

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 (August 25, 2021). 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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