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Experimental Economics

, Volume 20, Issue 1, pp 237–258 | Cite as

The importance of higher-order beliefs to successful coordination

  • Steven J. BosworthEmail author
Original Paper

Abstract

Beliefs about other players’ strategies are crucial in determining outcomes for coordination games. If players are to coordinate on an efficient equilibrium, they must believe that others will coordinate with them. In many settings there is uncertainty about beliefs as well as strategies. Do people consider these “higher-order” beliefs (beliefs about beliefs) when making coordination decisions? I design a modified stag hunt experiment that allows me to identify how these higher-order beliefs and uncertainty about higher-order beliefs matter for coordination. Players prefer to invest especially when they believe that others are “optimistic” that they will invest; but knowledge that others think them unlikely to invest does not cause players to behave differently than when they do not know what their partners think about them. Thus resolving uncertainty about beliefs can result in marked efficiency gains.

Keywords

Stag hunt Coordination Higher-order beliefs 

Mathematical Subject Classification

C72 C91 C92 D83 

Notes

Acknowledgments

The author wishes to thank professor Lise Vesterlund for advice and support, professor Stephanie Wang for help in experimental design, seminar participants at the University of Pittsburgh, attendees at the 2012 Economic Science Association World and North American meetings, and participants at the 2015 Thurgau Experimental Economics Meeting. Support was also received from the Kiel Institute for the World Economy. Anonymous referees made several helpful suggestions towards improving the exposition of the paper.

Supplementary material

10683_2016_9483_MOESM1_ESM.pdf (29 kb)
Supplementary material 1 (PDF 29 kb)
10683_2016_9483_MOESM2_ESM.pdf (29 kb)
Supplementary material 2 (PDF 29 kb)
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Supplementary material 3 (PDF 25 kb)
10683_2016_9483_MOESM4_ESM.pdf (26 kb)
Supplementary material 4 (PDF 25 kb)

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Copyright information

© Economic Science Association 2016

Authors and Affiliations

  1. 1.Kiel Institute for the World EconomyKielGermany

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