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

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Abstract. 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.

J.E.L. classification codes. C72, C91

Keywords. Coordination game, Non-equilibrium, Focal point, Nash equilibrium, Equilibrium selection, Coordination device

Nick Vriend, n.vriend@qmul.ac.uk
Last modified 2016-02-05