Efficient coordination in weakest-link games

Arbeitspapier

Existing experimental research on behavior in weakest-link games shows overwhelmingly the inability of people to coordinate on the efficient equilibrium, especially in larger groups. We hypothesize that people will be able to coordinate on efficient outcomes, provided they have sufficient freedom to choose their interaction neighborhood. We conduct experiments with medium sized and large groups and show that neighborhood choice indeed leads to coordination on the fully efficient equilibrium, irrespective of group size. This leads to substantial welfare effects. Achieved welfare is between 40 and 60 percent higher in games with neighborhood choice than without neighborhood choice. We identify exclusion as the simple but very effective mechanism underlying this result. In early rounds, high performers exclude low performers who in consequence learn to become high performers.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 3685

Classification and Topics

• Classification: Wirtschaft ; Noncooperative Games ; Design of Experiments: Laboratory, Group Behavior ; Institutions: Design, Formation, Operations, and Impact ; Network Formation and Analysis: Theory
• Subject: efficient coordination ; weakest-link ; minimum effort ; neighborhood choice ; experiment ; Verhaltensökonomik ; Wohlfahrtseffekt ; Nichtkooperatives Spiel ; Test

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Riedl, Arno ; Rohde, Ingrid M. T. ; Strobel, Martin
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/54931
• Last update: 10.03.2025, 11:42 AM CET