Identifying the Reasons for Coordination Failure in a Laboratory Experiment

31 Pages Posted: 25 Sep 2016 Last revised: 9 Nov 2018

See all articles by Philipp Külpmann

Philipp Külpmann

University of Vienna - Vienna Center for Experimental Economics

Davit Khantadze

University of Warwick

Date Written: November 8, 2018

Abstract

We investigate the effect of absence of common knowledge on the outcomes of coordination games in a laboratory experiment.

Using cognitive types, we can explain coordination failure in pure coordination games while differentiating between coordination failure due to first- and higher-order beliefs.

In our experiment, around 76% of the subjects have chosen the payoff-dominant equilibrium strategy despite the absence of common knowledge. However, 9% of the players had first-order beliefs that lead to coordination failure and another 9% exhibited coordination failure due to higher-order beliefs. Furthermore, we compare our results with predictions of commonly used models of higher-order beliefs.

Keywords: Higher-order beliefs, coordination failure, cognitive abilities, experimental economics, game theory

JEL Classification: C72, C92, D83

Suggested Citation

Külpmann, Philipp and Khantadze, Davit, Identifying the Reasons for Coordination Failure in a Laboratory Experiment (November 8, 2018). Center for Mathematical Economics Working Paper No. 567. Available at SSRN: https://ssrn.com/abstract=2842585

Philipp Külpmann (Contact Author)

University of Vienna - Vienna Center for Experimental Economics ( email )

Oskar-Morgenstern-Platz 1
Vienna, Vienna 1090
Austria

Davit Khantadze

University of Warwick ( email )

Gibbet Hill Rd.
Coventry, West Midlands CV4 8UW
United Kingdom

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