Compromise and Coordination: An Experimental Study

30 Pages Posted: 1 Mar 2018

See all articles by Simin He

Simin He

Shanghai University of Finance and Economics - School of Economics

Jiabin Wu

University of Oregon - Department of Economics

Date Written: February 19, 2018

Abstract

This paper experimentally studies the role of a compromise option in a repeated battle-of-the-sexes game. We find that in a random-matching environment, compromise serves as an effective focal point and facilitates coordination, but fails to improve efficiency. However, in a fixed-partnership environment, compromise deters subjects from learning to play alternation, a more efficient but also more complex strategy. As a result, compromise hurts efficiency in the long-run by allowing subjects to coordinate on the less efficient outcome. We explore various behavioral mechanisms and suggest that people may fail to use an equal and efficient strategy if such a strategy is complex.

Keywords: Compromise, Battle-of-the-Sexes, Repeated games, Behavioral game theory, Experimental economics

JEL Classification: C72, C92

Suggested Citation

He, Simin and Wu, Jiabin, Compromise and Coordination: An Experimental Study (February 19, 2018). Available at SSRN: https://ssrn.com/abstract=3126437 or http://dx.doi.org/10.2139/ssrn.3126437

Simin He

Shanghai University of Finance and Economics - School of Economics ( email )

777 Guoding Road
Shanghai, 200433
China

Jiabin Wu (Contact Author)

University of Oregon - Department of Economics ( email )

Eugene, OR 97403
United States

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