The Value of a Coordination Game

71 Pages Posted: 14 Jul 2021

See all articles by Wouter Kager

Wouter Kager

University of Amsterdam

Willemien Kets

University of Oxford

Alvaro Sandroni

University of Pennsylvania - Department of Economics; Northwestern University - Kellogg School of Management

Date Written: June 2021

Abstract

The value of a game is the payoff a player can expect (ex ante) from playing the game. Understanding how the value changes with economic primitives is critical for policy design and welfare. However, for games with multiple equilibria, the value is difficult to determine. We therefore develop a new theory of the value of coordination games. The theory delivers testable comparative statics on the value and delivers novel insights relevant to policy design. For example, policies that shift behavior in the desired direction can make everyone worse off, and policies that increase everyone's payoffs can reduce welfare.

Suggested Citation

Kager, Wouter and Kets, Willemien and Sandroni, Alvaro, The Value of a Coordination Game (June 2021). CEPR Discussion Paper No. DP16229, Available at SSRN: https://ssrn.com/abstract=3886671

Wouter Kager (Contact Author)

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Willemien Kets

University of Oxford

Mansfield Road
Oxford, OX1 4AU
United Kingdom

Alvaro Sandroni

University of Pennsylvania - Department of Economics ( email )

Ronald O. Perelman Center for Political Science
133 South 36th Street
Philadelphia, PA 19104-6297
United States

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States
847-491-5461 (Phone)
847-467-1220 (Fax)

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