Challenging Conformity: A Case for Diversity
42 Pages Posted: 19 Nov 2016
Date Written: September 11, 2016
This paper presents a novel mechanism under which diversity affects performance even if it has no direct impact on payoffs. Diversity matters because it influences the degree of strategic uncertainty that players face. We model this by incorporating the dual process account of Theory of Mind into the standard game-theoretic framework. Whether diversity is a cost or a benefit depends on whether the primary concern is to avoid miscoordination or to break out of an inefficient Nash equilibrium.
Keywords: diversity, game theory, belief formation, coordination failures, Theory of Mind
JEL Classification: C70, C72, D03, D83
Suggested Citation: Suggested Citation