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On the role of non-equilibrium focal points as coordination devices
Bosch-Domènech, Antoni; Vriend, Nicolaas J.
Universitat Pompeu Fabra. Departament d'Economia i Empresa
Considering a pure coordination game with a large number of equivalentequilibria, we argue, first, that a focal point that is itself not a Nash equilibriumand is Pareto dominated by all Nash equilibria, may attract the players'choices. Second, we argue that such a non-equilibrium focal point may act asan equilibrium selection device that the players use to coordinate on a closelyrelated small subset of Nash equilibria. We present theoretical as well asexperimental support for these two new roles of focal points as coordinationdevices.
Behavioral and Experimental Economics
coordination game
focal point
nash equilibrium
equilibrium selection
coordination device
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