Efficient Coordination in Weakest-Link Games

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Existing experimental research on behavior in weakest-link games shows overwhelmingly the inability of people to coordinate on the efficient equilibrium, especially in larger groups. We hypothesize that people will be able to coordinate on efficient outcomes, provided they have sufficient freedom to choose their interaction neighborhood. We conduct experiments with medium sized and large groups and show that neighborhood choice indeed leads to coordination on the fully efficient equilibrium, irrespective of group size. This leads to substantial welfare effects. Achieved welfare is between 40 and 60 percent higher in games with neighborhood choice than without neighborhood choice. We identify exclusion as the simple but very effective mechanism underlying this result. In early rounds, high performers exclude low performers who in consequence 'learn' to become high performers. Terms of use: Documents inJEL-Code: C720, C920, D020, D030, D850.

Coordination with communication under oath

“…If people can freely choose their coordination partner, they can choose people they already know are trustworthy, so commitment is guaranteed and coordination is efficient (see Riedl, Rohde, and Strobel, 2011). But in many cases, people must coordinate with people they do not know.…”

Costly Information Acquisition, Social Networks and Asset Prices: Experimental Evidence

“…When information is costly to obtain, the probability of acquiring information and amount of signals purchased decreases with the number of neighbors of an investor. We provide evi- (Riedl, Rohde and Strobel (2016)). An immediate extension of our experiments would be to allow for the co-evolution of the information network.…”

Team production benefits from a permanent fear of exclusion

“…Simple exclusion did not significantly raise contributions, but when exclusion was paired with redistribution of the excluded players' contribution, contributions significantly increased compared to the baseline treatment. Riedl et al (2011) studied coordination in large groups in a weakest-link network game. In their experiment subjects chose with whom they wanted to interact.…”