Efficient Coordination in Weakest-Link Games

Arno Riedl, Ingrid Rohde and Martin Strobel

No 201103, Working Papers from Murat Sertel Center for Advanced Economic Studies, Istanbul Bilgi University

Abstract: 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.

Keywords: efficient coordination; weakest-link; minimum effort; neighborhood choice; experiment (search for similar items in EconPapers)
JEL-codes: C72 C92 D02 D03 D85 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2011-12
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Citations: View citations in EconPapers (4)

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http://repeck.bilgi.org.tr/RePEc/msc/wpaper/mscent ... akest-Link_Games.pdf First version, 2011 (application/pdf)

Related works:
Journal Article: Efficient Coordination in Weakest-Link Games (2016)
Working Paper: Efficient Coordination in Weakest-Link Games (2011)
Working Paper: Efficient Coordination in Weakest-Link Games (2011)
Working Paper: Efficient coordination in weakest-link games (2011)
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