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To Catch a Stag: Identifying payoff- and risk-dominance effects in coordination games

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  • Jagau, Stephan

Abstract

Five decades after Harsanyi and Selten's seminal work on equilibrium selection, we remain unable to predict the outcomes of real-life coordination even in simple cases. One reason is that experiments have struggled to quantify the effects of payoff- and risk-dominance and to separate them from context factors like feedback, repetition, and complexity. This experiment is the first to demonstrate that both payoff- and risk-dominance significantly and independently impact coordination decision-making. Three innovations characterize the design: First, payoff- and risk-dominance are disentangled using orthogonal measures of strategic incentives and welfare externalities. Second, a no-feedback, choice-list task format minimizes deviations from one-shot incentives. Third, beliefs about others' behavior are elicited. Strikingly, heterogeneous beliefs across the population rationalize not only reactions to risk dominance but also most reactions to payoff dominance. In addition, deviations from expected-value maximization in specific games suggest a minor role for social projection or other-regarding preferences.

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  • Jagau, Stephan, 2024. "To Catch a Stag: Identifying payoff- and risk-dominance effects in coordination games," Games and Economic Behavior, Elsevier, vol. 147(C), pages 429-448.
    • Handle: RePEc:eee:gamebe:v:147:y:2024:i:c:p:429-448
    DOI: 10.1016/j.geb.2024.08.011
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    More about this item

    Keywords

    Coordination; Experiment; One-shot games; Choice list; Belief elicitation; Payoff dominance; Risk dominance;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • D9 - Microeconomics - - Micro-Based Behavioral Economics

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