Does information transparency decrease coordination failure?

Regina M. Anctil, John Dickhaut, Cathleen Johnson, Chandra Kanodia

Research output: Contribution to journalArticle

5 Scopus citations

Abstract

We test the effect of information transparency on the probability of coordination failure in games with finite signals. Prior theory has shown that the effect of information transparency is ambiguous. Our study is based on two insights. Where signal space is finite, increased transparency usually destroys uniqueness of equilibria; and increasing transparency can reverse the risk-dominance ordering of equilibria. Our experiments show that increasing transparency improves coordination only when transparency makes the efficient equilibrium risk dominant. Coordination is degraded when increased transparency causes the secure equilibrium to be risk dominant. These results are consistent with subjects holding level-1 beliefs.

Original languageEnglish (US)
Pages (from-to)228-241
Number of pages14
JournalGames and Economic Behavior
Volume70
Issue number2
DOIs
StatePublished - Nov 2010

Keywords

  • Equilibrium selection
  • Level-k thinking
  • Private information
  • Risk dominance
  • Strategic uncertainty

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