On the Role of Non-equilibrium Focal Points as Coordination Devices
Antoni Bosch-Domènech, Universitat Pompeu Fabra and Barcelona Graduate School of Economics, Barcelona
Nicolaas J. Vriend, Queen Mary, University of London
Journal of Economic Behavior and Organization, 2013, Vol. 94, p. 52-67
Full paper incl. appendices (PDF format)
Considering a pure coordination game with a large number of equivalent equilibria, we argue that a focal point that is itself not a Nash equilibrium, and is Pareto dominated by all Nash equilibria, may enhance coordination substantially. Besides attracting the players' choices to itself, such a non-equilibrium focal point may act as an equilibrium selection device that the players use to coordinate on a small subset of Nash equilibria. We present experimental support for these two roles of non-equilibrium focal points as coordination devices, and suggest a theoretical explanation for this.
Nick Vriend, firstname.lastname@example.org
Last modified 2016-02-05