Department of Economics and Business - Universitat Pompeu Fabra

Title:: On the role of non-equilibrium focal points as coordination devices
Authors:: Antoni Bosch-Domènech and Nicolaas J. Vriend
Date:: February 2008
Abstract:: Considering a pure coordination game with a large number of equivalent equilibria, we argue, first, that a focal point that is itself not a Nash equilibrium and is Pareto dominated by all Nash equilibria, may attract the players' choices. Second, we argue that such a non-equilibrium focal point may act as an equilibrium selection device that the players use to coordinate on a closely related small subset of Nash equilibria. We present theoretical as well as experimental support for these two new roles of focal points as coordination devices.
Keywords:: Coordination game, Focal point, Nash equilibrium, Equilibrium selection, Coordination device, LeeX
JEL codes:: C72, C91
Area of Research:: Behavioral and Experimental Economics
Published in:: Journal of Economic Behavior and Organization, Volume 94, Pages 52-67, October 2013.

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