Information transparency and equilibrium selection in coordination games: an experimental study

Abstract

We experimentally investigate the role of information transparency for equilibrium selection in stag hunt coordination games. These games can be transformed from a prisoner's dilemma game by introducing a centralized reward or punishment scheme. We aim to explore the impact of the disclosure of information on how final payoffs are derived on players' incentive to coordinate on the payoff-dominant equilibrium. We find that such information disclosure significantly increases the tendency of players to play payoff-dominant action and reduces the occurrence of coordination failure. The mechanism works directly through the positive impact of disclosure on the saliency of the payoffdominant equilibrium, and indirectly through the positive influence of disclosure on players' belief about the likelihood of cooperation by opponent.