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Ten isn’t large! Group size and coordination in a large-scale experiment

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Listed:
  • Jasmina Arifovic
  • Cars Hommes
  • Anita Kopányi-Peuker
  • Isabelle Salle

Abstract

This paper provides experimental evidence on coordination within genuinely large groups that could proxy the atomistic nature of real-world markets and organizations. We use a bank-run game where the two pure-strategy equilibria “run” and “wait” can be ranked by payoff and risk-dominance and a random sequence of public announcements introduces stochastic sunspot equilibria. We find systematic group size differences that theory fails to predict. In the presence of strategic uncertainty, the behavior of small groups is uninformative of behavior in large groups: in contrast to groups of 10, large groups only coordinate on the safest but Pareto-inferior “run” strategy and never coordinate on sunspots. Our results entail a series of theoretical and experimental implications.

Suggested Citation

  • Jasmina Arifovic & Cars Hommes & Anita Kopányi-Peuker & Isabelle Salle, 2020. "Ten isn’t large! Group size and coordination in a large-scale experiment," Staff Working Papers 20-30, Bank of Canada.
    • Handle: RePEc:bca:bocawp:20-30
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    References listed on IDEAS

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    Cited by:

    1. Hubert J. Kiss & Ismael Rodriguez-Lara & Alfonso Rosa-Garcia, 2022. "Experimental bank runs," Chapters, in: Sascha Füllbrunn & Ernan Haruvy (ed.), Handbook of Experimental Finance, chapter 25, pages 347-361, Edward Elgar Publishing.
      • Hubert J. Kiss & Ismael Rodriguez-Lara & Alfonso Rosa-Garcia, 2021. "Experimental Bank Runs," ThE Papers 21/03, Department of Economic Theory and Economic History of the University of Granada..

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    More about this item

    Keywords

    Financial markets; Financial stability;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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