Economics
College of Humanities and Social Sciences

Constrained Coordination: Experimental and Russian Evidence

Bridget Butkevich

Major Professor: David M Levy, PhD, Department of Economics

Truland Building, 4th floor
May 01, 2007, 08:00 PM to 07:00 PM

Abstract:

This is 3 essays on constraints that help or hinder coordination in multiple equilibria environments. The first essay is a replication and expansion on a continental divide game, which has high and low equilibrium. Whether individuals are able to reach the Pareto superior in the experiment replicated resulted from historical accident and is one incidence of more general starting point problems. The first essay examines whether common knowledge of common payoffs overcomes the starting point problem, and in most cases it seems to accomplish this task. Uncertainty of others payoffs may be what drives the starting point problem in the continental divide experiment. The next essay uses the same continental divide game to examine how advice may be generated and applied in an experiment. The same coordination experiment is used as a baseline, since it is a realm where advice may be helpful to select between a high and low equilibrium. Instead we found that the popular advice leads subjects to a focal point between the two equilibria. The advice was generated by subjects in one generation, and passed along to subsequent subjects. We passed along the popular andunpopular advice, to keep sure the impact of the advice is not just noise. The popular and unpopular advice differ from one another, and the way the popular advice differs may help partially solve the historical accident/starting point problem as full information does. The final essay examines how Russian anecdotal evidence may act to coordinate collective action in the face of radical uncertainty. Many Russian proverbs provide guides against heroic behavior and towards central guaranteed payoffs. This resembles the advice generated in the second essay, which protects against the low equilibrium . Unfortunately, this also cautions against behavior which could result in a higher equilibrium. All 3 of the essays explore both how constraints may be utility enhancing and how these constraints may be develop.

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