Coordination via Delay: Theory and Experiment

35 Pages Posted: 16 Apr 2020 Last revised: 13 Jun 2021

See all articles by Ye Jin

Ye Jin

New York University (NYU) - New York University (NYU), Shanghai

Zhen Zhou

Tsinghua University - PBC School of Finance

Adam Brandenburger

New York University (NYU) - Leonard N. Stern School of Business

Date Written: April 2, 2020

Abstract

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

Jin, Ye and Zhou, Zhen and Brandenburger, Adam, Coordination via Delay: Theory and Experiment (April 2, 2020). NYU Stern School of Business, PBCSF-NIFR Research Paper, Available at SSRN: https://ssrn.com/abstract=3566660 or http://dx.doi.org/10.2139/ssrn.3566660

Ye Jin (Contact Author)

New York University (NYU) - New York University (NYU), Shanghai ( email )

1555 Century Ave
Shanghai, Shanghai 200122
China

Zhen Zhou

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Adam Brandenburger

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

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