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When Does Communication Improve Coordination?

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  • Tore Ellingsen
  • Robert Östling

Abstract

We study costless pre-play communication of intentions among inexperienced players. Using the level-k model of strategic thinking to describe players' beliefs, we fully characterize the effects of preplay communication in symmetric 2x2 games. One-way communication weakly increases coordination on Nash equilibrium outcomes, although average payoffs sometimes decrease. Two-way communication further improves payoffs in some games but is detrimental in others. Moving beyond the class of symmetric 2x2 games, we find that communication facilitates coordination in common interest games with positive spillovers and strategic complementarities, but there are also games in which any type of communication hampers coordination. (JEL C72, D83)

Suggested Citation

  • Tore Ellingsen & Robert Östling, 2010. "When Does Communication Improve Coordination?," American Economic Review, American Economic Association, vol. 100(4), pages 1695-1724, September.
    • Handle: RePEc:aea:aecrev:v:100:y:2010:i:4:p:1695-1724
    Note: DOI: 10.1257/aer.100.4.1695
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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