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Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-51538

Kriss, Peter H; Blume, Andreas; Weber, Roberto A (2011). Coordination, Efficiency and Pre-Play Communication with Forgone Costly Messages. Working paper series / Department of Economics No. 34, University of Zurich.

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Abstract

We examine communication in a two-player coordination game with Pareto-ranked equilibria. Prior research demonstrates that efficient coordination is difficult without communication but obtains regularly with (mandatory) costless pre-play messages. In a laboratory experiment, we introduce two realistic features of communication by making the sending of messages optional and costly. Even small costs dramatically reduce message use, but efficient coordination of actions occurs with similar frequency to that observed under costless communication. By varying communication costs we corroborate several predictions from a theoretical analysis based on forward induction. Our results indicate that, for some levels of communication costs, explicit communication may be unnecessary for efficient coordination; instead, players simply need to know that the option to send messages was available. Thus, the relationship between communication and coordination is more complex than suggested by prior research.

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
DDC:330 Economics
JEL Classification:C72, C92, D83
Language:English
Date:October 2011
Deposited On:25 Nov 2011 10:13
Last Modified:12 Sep 2012 14:58
Series Name:Working paper series / Department of Economics
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/wp.html

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