What Price Coordination? The Efficiency-Enhancing Effect of Auctioning the Right to Play

UCSD Economics Discussion Paper No. 95-41R

Posted: 25 Jun 1997

See all articles by Vincent P. Crawford

Vincent P. Crawford

University of California, San Diego (UCSD) - Department of Economics; University of Oxford - Department of Economics

Bruno Broseta

Organismo Público Valenciano de Investigación (OPVI)

Date Written: January 1997

Abstract

A model is proposed to explain the results of recent experiments in which subjects repeatedly played a coordination game, with the right to play auctioned each period in a larger group. Subjects invariably bid the market-clearing price to a level recoverable only in the efficient equilibrium and then converged to that equilibrium, although subjects who played the game without auctions always converged to inefficient equilibria. The efficiency-enhancing effect of auctions is reminiscent of forward induction, but is not explained by equilibrium refinements. The model explains it by showing how strategic uncertainty interacts with history-dependent learning dynamics to determine equilibrium selection.

JEL Classification: C70, D81

Suggested Citation

Crawford, Vincent P. and Broseta, Bruno, What Price Coordination? The Efficiency-Enhancing Effect of Auctioning the Right to Play (January 1997). UCSD Economics Discussion Paper No. 95-41R, Available at SSRN: https://ssrn.com/abstract=8595

Vincent P. Crawford (Contact Author)

University of California, San Diego (UCSD) - Department of Economics ( email )

Department of Economics
9500 Gilman Drive
La Jolla, CA 92093-0508
United States
302-729-3230 (Phone)

HOME PAGE: http://econweb.ucsd.edu/~v2crawford/

University of Oxford - Department of Economics ( email )

All Souls College
Oxford, Oxfordshire OX1 4AL
United Kingdom
+44-1865-279339 (Phone)

HOME PAGE: http://econweb.ucsd.edu/~v2crawford/

Bruno Broseta

Organismo Público Valenciano de Investigación (OPVI) ( email )

Instituto de la Empresa Familiar
c/Salamanca 68
46005 Valencia
Spain

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