Measuring Strategic Uncertainty in Coordination Games

By Frank Heinemann, Rosemarie Nagel, Peter Ockenfels. Social Science Research Network, 2004

325 citations recorded by the source corpus.

This paper explores three aspects of strategic uncertainty: its relation to risk, predictability of behavior and subjective beliefs of players. In a laboratory experiment we measure subjects’ certainty equivalents for three coordination games and one lottery. Behavior in coordination games is related to risk aversion, experience seeking, and age. From the distribution of certainty equivalents we estimate probabilities for successful coordination in a wide range of games. For many games, success of coordination is predictable with a reasonable error rate. The best response to observed behavior is close to the global-game solution. Comparing choices in coordination games with revealed risk aversion, we estimate subjective probabilities for successful coordination. In games with a low coordination requirement, most subjects underestimate the probability of success. In games with a high coordination requirement, most subjects overestimate this probability. Estimating probabilistic decision models, we show that the quality of predictions can be improved when individual characteristics are taken into account. Subjects’ behavior is consistent with probabilistic beliefs about the aggregate outcome, but inconsistent with probabilistic beliefs about individual behavior.

Subfields: Economics and Econometrics, General Decision Sciences, Safety Research

View Paper: https://www.semanticscholar.org/paper/7925d59293a920530fabfb345837c9a7f5d439ae

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. J. Duffy
2. Giancarlo Spagnolo
3. Ferdinand M. Vieider
4. Stefan T. Trautmann
5. Michal Krawczyk
6. Fabrice Le Lec

In General Decision Sciences

1. J. Duffy
2. Ferdinand M. Vieider
3. Stefan T. Trautmann
4. Michal Krawczyk
5. Fabrice Le Lec

In Safety Research

1. J. Duffy
2. Ferdinand M. Vieider
3. Stefan T. Trautmann
4. Michal Krawczyk
5. Fabrice Le Lec

Citations in the corpus

• Social influences on risk attitudes: Applications in economics (2012, background): “In a comprehensive study, Heinemann et al. (2009) investigated risk taking in coordination games.”
• Belief Elicitation: A Horse Race Among Truth Serums (2015, unknown): “…1 E.g. Branch (2004) for macroeconomic expectations; Armantier & Treich 2009; Bellemare, Kroeger & van Soest 2008; Costa-Gomez & Weizsaecker 2008; Heinemann, Nagel & Ockenfels 2009; Nyarko & Schotter 2002, for behavior in games; Haruvy, Lahav, & Noussair 2007 for trading in asset markets; Carman…”
• Equilibrium Selection in the Repeated Prisoner's Dilemma: Axiomatic Approach and Experimental Evidence (2011, background): “Previous experimental studies have shown that ecient but risky equilibria are often not chosen if gains are small or coordination requirements high (see van Huyck et al. (1990) and Heinemann et al (2009) ).”
• Macroeconomics: A Survey of Laboratory Research (2016, background): “Experimental studies of the behavioral relevance of these other mechanisms is an important an open question for future research .”