A Road to Efficiency through Communication and Commitment

Abstract

We experimentally examine the efficacy of a novel pre-play institution in a well-known coordination game—the minimum-effort game—in which coordination failures are robust and persistent phenomena. This new institution allows agents to communicate while incrementally committing to their words, leading to a distinct theoretical prediction: the efficient outcome is uniquely selected in the extended coordination game. We find that commitment-enhanced communication significantly increases subjects’ payoffs and achieves higher efficiency levels than various non-binding forms of communication. We further identify the key ingredients of the institution that are central to achieving such gains.

Sign-up for mailing list: Please email Natalie Lee.

This seminar will start with a 5-minute announcement for the 2023-24 seminar series. The seminar ends at 17:20.