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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.
2008-03-13
Behavioral and Experimental Economics
coordination game
focal point
nash equilibrium
equilibrium selection
coordination device
leex
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