2000/03 LEM Working Paper Series

Coordination in "Critical Mass" Games: An Experimental Study
Devetag M.G.
In this paper we describe a tacit and simultaneous n-person coordination game in normal form, designed to reflect economic decisions characterized by "critical mass" and "increasing returns" phenomena. We then present some experimental studies on this game in which different information treatments are tested. Our results show that in the presence of full information about the players' entire distribution of choises, some cohorts are able to achieve efficiency in the absence of mutual communication. Efficient outcomes in some instances are achieved through a gradual and time-dependent dynamic of "collective hill-climbing" that creates convergence to the payoff-dominants equilibrium. On the contrary, when players only know their own payoffs, no convergence occurs and efficiency is low. Providing players with information about the median of previous period choises helps players converge to equilibria, but such equilibria are inefficient ones.The addition to the basic payoff function of increasing returns in the number of players choosing the same action seems to favor coordination on the efficient equilibrium.

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