Abstract
We use experiments to investigate the efficacy of recommended play and performance bonuses in resolving coordination failures in a stag-hunt type coordination game with multiple Pareto-ranked equilibria, often referred to as a “weak link” game. Participants routinely find it difficult to coordinate to the payoff-dominant outcome in such games. We look at performance in both fixed and randomly re-matched groups. A recommendation to the payoff-dominant outcome is successful in resolving coordination failures with fixed groups but only when this recommendation is “common knowledge” in the sense that all members of the group receive the same message and it is read out loud for everyone to hear. Resolving coordination failures is harder with randomly re-matched groups and the greatest success is achieved only upon payment of a performance bonus.
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Appendix: Instructions for EXEC 397 “Recommended Play and Performance Bonuses in the Minimum Effort Coordination Game” by Ananish Chaudhuri and Tirnud Paichayontvijit (DOC 46KB)
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Chaudhuri, A., Paichayontvijit, T. Recommended play and performance bonuses in the minimum effort coordination game. Exp Econ 13, 346–363 (2010). https://doi.org/10.1007/s10683-010-9245-5
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DOI: https://doi.org/10.1007/s10683-010-9245-5