Arbeitspapier

Measuring strategic uncertainty in coordination games

This paper explores three aspects of strategic uncertainty: its relation to risk, predictability of behavior and subjective beliefs of players. In a laboratory experiment we measure subjects? certainty equivalents for three coordination games and one lottery. Behavior in coordination games is related to risk aversion, experience seeking, and age. From the distribution of certainty equivalents we estimate probabilities for successful coordination in a wide range of games. For many games, success of coordination is predictable with a reasonable error rate. The best response to observed behavior is close to the global-game solution. Comparing choices in coordination games with revealed risk aversion, we estimate subjective probabilities for successful coordination. In games with a low coordination requirement, most subjects underestimate the probability of success. In games with a high coordination requirement, most subjects overestimate this probability. Estimating probabilistic decision models, we show that the quality of predictions can be improved when individual characteristics are taken into account. Subjects? behavior is consistent with probabilistic beliefs about the aggregate outcome, but inconsistent with probabilistic beliefs about individual behavior.

Language
Englisch

Bibliographic citation
Series: CESifo Working Paper ; No. 1364

Classification
Wirtschaft
Noncooperative Games
Expectations; Speculations
Criteria for Decision-Making under Risk and Uncertainty
Design of Experiments: Laboratory, Individual
Subject
Nichtkooperatives Spiel
Koordination
Entscheidung bei Unsicherheit
Messung
Experiment

Event
Geistige Schöpfung
(who)
Heinemann, Frank
Nagel, Rosemarie
Ockenfels, Peter
Event
Veröffentlichung
(who)
Center for Economic Studies and ifo Institute (CESifo)
(where)
Munich
(when)
2004

Handle
Last update
10.03.2025, 11:41 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Heinemann, Frank
  • Nagel, Rosemarie
  • Ockenfels, Peter
  • Center for Economic Studies and ifo Institute (CESifo)

Time of origin

  • 2004

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