The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information

Abstract

The theory of global games has shown that coordination games with multiple equilibria may have a unique equilibrium if certain parameters of the payoff function are private information instead of common knowledge. We report the results of an experiment designed to test the predictions of this theory. Comparing sessions with common and private information, we observe only small differences in behavior. For common information, subjects coordinate on threshold strategies that deviate from the global game solution towards the payoff-dominant equilibrium. For private information, thresholds are closer to the global game solution than for common information. Variations in the payoff function affect behavior as predicted by comparative statics of the global game solution. Predictability of coordination points is about the same for both information conditions.

Risk attitude, beliefs, and information in a Corruption Game – An experimental analysis

“…In line with the findings of Heinemann et al (2004) and Heinemann et al (2009), the majority of the participants in our study (64 out of 72 ≈ 89%) chose a threshold strategy. The switching point of the threshold strategy is given by the probability of obtaining the higher payoff in Alternative B for the lottery number at which point the players switched from Alternative A to Alternative B.…”

“…According to the findings of Heinemann et al (2004), participants use threshold strategies, meaning that they should choose Alternative A for low probabilities of obtaining the high payoff in the risky option and switch to Alternative B only once and stay with Alternative B for the remaining runs. A risk-neutral agent, for example, would switch from Alternative A to Alternative B between Nos.…”

Measuring agents’ reaction to private and public information in games with strategic complementarities

“…4 Other recent experiments concerning the welfare effects of transparency have concentrated on games with multiple equilibria: Anctil et al (2004) demonstrate that private signals with high precision are not sufficient to achieve coordination on an efficient equilibrium. Heinemann et al (2004) compare perfect public and noisy private signals in coordination games and find small effects towards higher efficiency with perfect information. For other experiments dealing with public versus private information, see Forsythe et al (1982), Plott and Sunder (1988), McKelvey and Ordeshook (1985), McKelvey and Page (1990) and Hanson (1996).…”

When and why? A critical survey on coordination failure in the laboratory

“…In this article we review critically this class of coordination games, distinguishing between order-statistic games like VHBB (1990) and VHBB (1991) and stag-hunt games like the ones in CDFR (1992) that have motivated the global games literature (e.g., Carlsson and Van Damme, 1993;Morris and Shin, 2003;Heinemann, Nagel and Ockenfels, 2004). We are well aware that these labels are somewhat misleading, as both are coordination games with Pareto-ranked equilibria, and stag-hunt games can also be discussed as a special kind of order-statistic games.…”