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Abstract
We experimentally study equilibrium selection in repeated coordination games played on networks. We test predictions from three competing theories. In line with payoff-dominance as a deductive selection principle, experienced subjects coordinate on the payoff-dominant (but risk-dominated) equilibrium. Groups of inexperienced subjects reach coordination through adaptive dynamics, with the likelihood of convergence to the payoff-dominant equilibrium not depending on the network structure. Subjects’ reactions to deviations from an established equilibrium challenge the proposition that decision noise favors coordination on the risk-dominant equilibrium.
Keywords: coordination; convention; risk dominance; Pareto-ranked equilibria; network effects; stochastic stability
Published Online: 2012-9-12
©2012 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
