The Value of a Coordination Game
47 Pages Posted: 29 Mar 2021
Date Written: March 2, 2021
The value of a game is the payoff a player can expect from playing the game. Wecharacterize how the value of a coordination game depends on the economic environment.The central insight is that players face two types of coordination problems: (1) How tocoordinate on a Nash equilibrium (i.e., avoid miscoordination); (2) How to coordinate onthe efficient Nash equilibrium (i.e., avoid coordination failure). We show in the context ofapplications that understanding which type of problem dominates is critical for assessingwelfare implications and for policy design.
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