Threat to Regulate and Coordination Failures: Experimental Evidence

Posted: 3 May 2000

See all articles by Martin Sefton

Martin Sefton

University of Nottingham - School of Economics

Abdullah Yavas

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics

Abstract

Coordination games can represent a wide range of issues in real estate. In this paper, we present the results of an experiment designed to investigate the impact of regulatory threats in a coordination game. The experiment consisted of two sessions. The first session included a simple coordination game. We found significant coordination failures among the players in this session. We then conducted a second session where we introduced a new player who had the choice to either intervene and regulate the payoffs of the other players or not to intervene and let the other players' actions determine the outcome. Our objective was to test whether the introduction of such a regulatory authority would induce more cooperative play by the players and move the market to the Pareto superior outcome. We found this not to be the case. There was no statistically significant difference between the choices of subjects in the two sessions.

JEL Classification: RO

Suggested Citation

Sefton, Martin and Yavas, Abdullah, Threat to Regulate and Coordination Failures: Experimental Evidence. J. OF REAL ESTATE FINANCE AND ECONOMICS, Vol. 11 No. 3. Available at SSRN: https://ssrn.com/abstract=7307

Martin Sefton

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Abdullah Yavas (Contact Author)

University of Wisconsin - School of Business - Department of Real Estate and Urban Land Economics ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

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