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Monotone and bounded interval equilibria in a coordination game with information aggregation

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Shadmehr, Mehdi and Bernhardt, Dan (2017) Monotone and bounded interval equilibria in a coordination game with information aggregation. Mathematical Social Sciences, 89 . pp. 61-69. doi:10.1016/j.mathsocsci.2017.05.007

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Official URL: https://doi.org/10.1016/j.mathsocsci.2017.05.007

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Abstract

We analyze how private learning in a class of games with common stochastic payoffs affects the form of equilibria, and how properties such as player welfare and the extent of strategic miscoordination relate across monotone and non-monotone equilibria. Researchers typically focus on monotone equilibria. We provide conditions under which non-monotone equilibria also exist, where players attempt to coordinate to obtain the stochastic payoff whenever signals are in a bounded interval. In bounded interval equilibria (BIE), an endogenous fear of miscoordination discourages players from coordinating to obtain the stochastic payoff when their signals suggest coordination is most beneficial. In contrast to monotone equilibria, expected payoffs from successful coordination in BIE are lower than the ex-ante expected payoff from ignoring signals and always trying to coordinate to obtain the stochastic payoff. We show that BIE only exist when, absent private information, the game would be a coordination game.

Item Type: Journal Article
Subjects: H Social Sciences > HB Economic Theory
Q Science > QA Mathematics
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Game theory, Cooperative games (Mathematics), Economics, Mathematical, Equilibrium (Economics)
Journal or Publication Title: Mathematical Social Sciences
Publisher: Elsevier BV
ISSN: 0165-4896
Official Date: September 2017
Dates:
DateEvent
September 2017Published
8 July 2017Available
23 May 2017Accepted
Volume: 89
Page Range: pp. 61-69
DOI: 10.1016/j.mathsocsci.2017.05.007
Status: Peer Reviewed
Publication Status: Published
Access rights to Published version: Restricted or Subscription Access

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