Identifying the Reasons for Coordination Failure in a Laboratory Experiment
31 Pages Posted: 25 Sep 2016 Last revised: 9 Nov 2018
Date Written: November 8, 2018
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: Suggested Citation