Coordination via Delay: Theory and Experiment
35 Pages Posted: 16 Apr 2020 Last revised: 13 Jun 2021
Date Written: April 2, 2020
This paper studies an option of delay in coordination games, allowing players to wait and then choose between the risk-dominant and payoff-dominant actions. The delay option enables forward induction whereby a player’s waiting signals an intention to choose the payoff-dominant action later. If players have ε-social preferences (they help other players if at no cost to themselves), iterated weak dominance yields an outcome where everyone waits and then chooses the payoff-dominant action if everyone else waited, so that efficient coordination results. Experimental evidence confirms that waiting can signal future play of the payoff-dominant action.
Keywords: Coordination, Communication, Forward Induction, Iterated Weak Dominance
JEL Classification: C73, C92, D83
Suggested Citation: Suggested Citation