Equilibrium selection in network coordination games: An experimental study

V. Frey, R. Corten, V. Buskens

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We experimentally study equilibrium selection in repeated coordination games played on networks. We test predictions from three competing theories. In line with payoff-dominance as a deductive selection principle, experienced subjects coordinate on the payoff-dominant (but risk-dominated) equilibrium. Groups of inexperienced subjects reach coordination through adaptive dynamics, with the likelihood of convergence to the payoff-dominant equilibrium not depending on the network structure. Subjects’ reactions to deviations from an established equilibrium challenge the proposition that decision noise favors coordination on the risk-dominant equilibrium.
Keywords: coordination; convention; risk dominance; Pareto-ranked equilibria; network effects; stochastic stability
Original languageEnglish
Pages (from-to)1-28
JournalReview of Network Economics
Volume11
Issue number3
DOIs
Publication statusPublished - 2013

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Equilibrium selection
Experimental study
Coordination games
Network effects
Adaptive dynamics
Pareto
Deviation
Prediction
Network structure
Key words
Risk dominance
Payoff dominance
Stochastic stability

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Frey, V. ; Corten, R. ; Buskens, V. / Equilibrium selection in network coordination games : An experimental study. In: Review of Network Economics. 2013 ; Vol. 11, No. 3. pp. 1-28.
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Equilibrium selection in network coordination games : An experimental study. / Frey, V.; Corten, R.; Buskens, V.

In: Review of Network Economics, Vol. 11, No. 3, 2013, p. 1-28.

Research output: Contribution to journalArticleScientificpeer-review

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AB - We experimentally study equilibrium selection in repeated coordination games played on networks. We test predictions from three competing theories. In line with payoff-dominance as a deductive selection principle, experienced subjects coordinate on the payoff-dominant (but risk-dominated) equilibrium. Groups of inexperienced subjects reach coordination through adaptive dynamics, with the likelihood of convergence to the payoff-dominant equilibrium not depending on the network structure. Subjects’ reactions to deviations from an established equilibrium challenge the proposition that decision noise favors coordination on the risk-dominant equilibrium.Keywords: coordination; convention; risk dominance; Pareto-ranked equilibria; network effects; stochastic stability

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