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Nash versus coarse correlation

Research output: Contribution to journalJournal article

Published
<mark>Journal publication date</mark>1/12/2020
<mark>Journal</mark>Experimental Economics
Volume23
Number of pages27
Pages (from-to)1178–1204
Publication StatusPublished
Early online date20/02/20
<mark>Original language</mark>English

Abstract

We run a laboratory experiment to test the concept of coarse correlated equilibrium (Moulin and Vial in Int J Game Theory 7:201-221, 1978), with a two-person game with unique pure Nash equilibrium which is also the solution of iterative elimination of strictly dominated strategies. The subjects are asked to commit to a device that randomly picks one of three symmetric outcomes (including the Nash point) with higher ex-ante expected payoff than the Nash equilibrium payoff. We find that the subjects do not accept this lottery (which is a coarse correlated equilibrium); instead, they choose to play the game and coordinate on the Nash equilibrium. However, given an individual choice between a lottery with equal probabilities of the same outcomes and the sure payoff as in the Nash point, the lottery is chosen by the subjects. This result is robust against a few variations. We explain our result as selecting risk-dominance over payoff dominance in equilibrium.

Bibliographic note

The final publication is available at Springer via https://doi.org/10.1007/s10683-020-09647-x