Behavioral Strategies in Repeated Pure Coordination Games
Consider the case where demand for some indivisible good exceeds the supply. In accordance with market forces prices typically go up and thereby decrease the excess demand1. However, in some cases, because of government regulation, custom, or social pressures applied by consumer groups, prices remain fixed. To meet the excess demand, alternative mechanisms have been devised to allocate the limited supply among the claimants. A commonly used mechanism allocates the goods according to the celebrated “first come, first served” principle. Seats in popular restaurants (where no reservations are taken) and newly introduced fashionable products (e.g., toys, records) are typically allocated in this manner. Although an argument can be made that this principle treats the claimants fairly, it has many disadvantages including, but not limited to, inefficient allocation of the good.
KeywordsStrategy Equilibrium Behavioral Strategy Choice Probability Pure Strategy Equilibrium Mixed Strategy Equilibrium
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