Discontinuous and continuous stochastic choice and coordination in the lab

Goryunov M. Rigos A.
December 2022 Academic Press Inc.

Journal of Economic Theory
2022 #206

We experimentally test theoretical predictions on equilibrium selection in a two-player coordination (investment) game. Through a minimal visual variation, our design prompts participants to play strategies whereby investing probability is either continuous or discontinuous in the payoff-relevant state. When participants use continuous strategies, average behavior is consistent with play in the risk-dominant equilibrium, the unique theoretical prediction. When they use discontinuous strategies, average behavior is closer to the payoff-dominant equilibrium strategy. In this case, the theory predicts multiple equilibria, for which we find no support. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies.

Continuous stochastic choice , Coordination , Global games , Information acquisition , Laboratory experiment , Perception

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Nazarbayev University, Kabanbay Batyr Ave 53, Nur-Sultan, 010000, Kazakhstan
Institute for Futures Studies, Holländargatan 13, Stockholm, 101 31, Sweden
Lund University, Sweden

Nazarbayev University
Institute for Futures Studies
Lund University

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