The Power and Limits of Sequential Communication in Coordination Games

Jeroen van de Ven's Homepage

The paper is written in collaboration with Simin He and Theo Offerman.

Abstract:

We study theoretically and experimentally the extent to which communication can solve coordination problems. We do this in the context of coordination games in which there is some conflict of interest. In contrast to existing studies, we allow players to chat sequentially and free-format. The main behavioral assumption that we make, which we dub the 'feigned-ignorance principle', is that players will ignore any communication unless they reach an agreement in which both players are better off. The model predicts that communication is effective in Battle-of-the-Sexes but futile in Chicken. A remarkable implication is that increasing players' payoffs can make them worse off, by making communication futile. Our experimental findings provide strong support for these and some other predictions.

The Choice Lab