Discontinuous and continuous stochastic choice and coordination in the lab

Maxim Goryunov; Alexandros Rigos

doi:10.1016/j.jet.2022.105557

Discontinuous and continuous stochastic choice and coordination in the lab

Maxim Goryunov, Alexandros Rigos

Department of Economics

Research output: Contribution to journal › Article › peer-review

Abstract

We experimentally test theoretical predictions on equilibrium selection in a two-player coordination (investment) game. Through a minimal visual variation, our design prompts participants to play strategies whereby investing probability is either continuous or discontinuous in the payoff-relevant state. When participants use continuous strategies, average behavior is consistent with play in the risk-dominant equilibrium, the unique theoretical prediction. When they use discontinuous strategies, average behavior is closer to the payoff-dominant equilibrium strategy. In this case, the theory predicts multiple equilibria, for which we find no support. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies.

Original language	English
Article number	105557
Journal	Journal of Economic Theory
Volume	206
DOIs	https://doi.org/10.1016/j.jet.2022.105557
Publication status	Published - 2022 Dec

Bibliographical note

Funding Information:
We thank Pol Campos-Mercade, Erik Mohlin, Stephen Morris, Alexander Nesterov, Jakub Steiner, Petra Thiemann, Isabel Trevino, and Erik Wengström for discussions and suggestions at various stages of this project, as well as the Editor, Faruk Gul, an anonymous associate editor, and two anonymous referees for their constructive comments. We also thank audiences at LGTC2019, Lisbon Meetings 2019, the Fall 2019 CNEE Workshop, the 2021 workshop on Attention in Decision Making in Lund, and seminar participants at Edinburgh and Lund. Goryunov is grateful to CERGE-EI Foundation for the Career Integration Fellowship and to Nazarbayev University for the support under FDCRGP, grant reference 021220FD4751 . Rigos is grateful to Erik Mohlin and Handelsbankens Forskningsstiftelser (grant # P2016-0079:1 ) for funding.

Funding Information:
We thank Pol Campos-Mercade, Erik Mohlin, Stephen Morris, Alexander Nesterov, Jakub Steiner, Petra Thiemann, Isabel Trevino, and Erik Wengström for discussions and suggestions at various stages of this project, as well as the Editor, Faruk Gul, an anonymous associate editor, and two anonymous referees for their constructive comments. We also thank audiences at LGTC2019, Lisbon Meetings 2019, the Fall 2019 CNEE Workshop, the 2021 workshop on Attention in Decision Making in Lund, and seminar participants at Edinburgh and Lund. Goryunov is grateful to CERGE-EI Foundation for the Career Integration Fellowship and to Nazarbayev University for the support under FDCRGP, grant reference 021220FD4751. Rigos is grateful to Erik Mohlin and Handelsbankens Forskningsstiftelser (grant #P2016-0079:1) for funding.

Publisher Copyright:
© 2022 The Author(s)

Subject classification (UKÄ)

Economics

Free keywords

Continuous stochastic choice
Coordination
Global games
Information acquisition
Laboratory experiment
Perception

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10.1016/j.jet.2022.105557

1 Working paper

Discontinuous and Continuous Stochastic Choice and Coordination in the Lab
Goryunov, M. & Rigos, A., 2020 Aug 31, 59 p. (Working Papers; no. 2020:17).
Research output: Working paper/Preprint › Working paper

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Cite this

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title = "Discontinuous and continuous stochastic choice and coordination in the lab",

abstract = "We experimentally test theoretical predictions on equilibrium selection in a two-player coordination (investment) game. Through a minimal visual variation, our design prompts participants to play strategies whereby investing probability is either continuous or discontinuous in the payoff-relevant state. When participants use continuous strategies, average behavior is consistent with play in the risk-dominant equilibrium, the unique theoretical prediction. When they use discontinuous strategies, average behavior is closer to the payoff-dominant equilibrium strategy. In this case, the theory predicts multiple equilibria, for which we find no support. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies.",

keywords = "Continuous stochastic choice, Coordination, Global games, Information acquisition, Laboratory experiment, Perception",

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note = "Funding Information: We thank Pol Campos-Mercade, Erik Mohlin, Stephen Morris, Alexander Nesterov, Jakub Steiner, Petra Thiemann, Isabel Trevino, and Erik Wengstr{\"o}m for discussions and suggestions at various stages of this project, as well as the Editor, Faruk Gul, an anonymous associate editor, and two anonymous referees for their constructive comments. We also thank audiences at LGTC2019, Lisbon Meetings 2019, the Fall 2019 CNEE Workshop, the 2021 workshop on Attention in Decision Making in Lund, and seminar participants at Edinburgh and Lund. Goryunov is grateful to CERGE-EI Foundation for the Career Integration Fellowship and to Nazarbayev University for the support under FDCRGP, grant reference 021220FD4751 . Rigos is grateful to Erik Mohlin and Handelsbankens Forskningsstiftelser (grant # P2016-0079:1 ) for funding. Funding Information: We thank Pol Campos-Mercade, Erik Mohlin, Stephen Morris, Alexander Nesterov, Jakub Steiner, Petra Thiemann, Isabel Trevino, and Erik Wengstr{\"o}m for discussions and suggestions at various stages of this project, as well as the Editor, Faruk Gul, an anonymous associate editor, and two anonymous referees for their constructive comments. We also thank audiences at LGTC2019, Lisbon Meetings 2019, the Fall 2019 CNEE Workshop, the 2021 workshop on Attention in Decision Making in Lund, and seminar participants at Edinburgh and Lund. Goryunov is grateful to CERGE-EI Foundation for the Career Integration Fellowship and to Nazarbayev University for the support under FDCRGP, grant reference 021220FD4751. Rigos is grateful to Erik Mohlin and Handelsbankens Forskningsstiftelser (grant #P2016-0079:1) for funding. Publisher Copyright: {\textcopyright} 2022 The Author(s)",

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doi = "10.1016/j.jet.2022.105557",

language = "English",

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AU - Rigos, Alexandros

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N2 - We experimentally test theoretical predictions on equilibrium selection in a two-player coordination (investment) game. Through a minimal visual variation, our design prompts participants to play strategies whereby investing probability is either continuous or discontinuous in the payoff-relevant state. When participants use continuous strategies, average behavior is consistent with play in the risk-dominant equilibrium, the unique theoretical prediction. When they use discontinuous strategies, average behavior is closer to the payoff-dominant equilibrium strategy. In this case, the theory predicts multiple equilibria, for which we find no support. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies.

AB - We experimentally test theoretical predictions on equilibrium selection in a two-player coordination (investment) game. Through a minimal visual variation, our design prompts participants to play strategies whereby investing probability is either continuous or discontinuous in the payoff-relevant state. When participants use continuous strategies, average behavior is consistent with play in the risk-dominant equilibrium, the unique theoretical prediction. When they use discontinuous strategies, average behavior is closer to the payoff-dominant equilibrium strategy. In this case, the theory predicts multiple equilibria, for which we find no support. Additionally, we extend the theory to heterogeneous populations: the set of equilibria monotonically decreases in the proportion of players who use continuous strategies.

KW - Continuous stochastic choice

KW - Coordination

KW - Global games

KW - Information acquisition

KW - Laboratory experiment

KW - Perception

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DO - 10.1016/j.jet.2022.105557

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SN - 0022-0531

VL - 206

JO - Journal of Economic Theory

JF - Journal of Economic Theory

M1 - 105557

ER -

Discontinuous and continuous stochastic choice and coordination in the lab

Abstract

Bibliographical note

Subject classification (UKÄ)

Free keywords

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Research output

Discontinuous and Continuous Stochastic Choice and Coordination in the Lab

Cite this