Nash versus coarse correlation

Konstantinos Georgalos, Indrajit Ray, Sonali Sen Gupta

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

We run a laboratory experiment to test the concept of coarse correlated equilibrium (Moulin and Vial in Int J Game Theory 7:201-221, 1978), with a two-person game with unique pure Nash equilibrium which is also the solution of iterative elimination of strictly dominated strategies. The subjects are asked to commit to a device that randomly picks one of three symmetric outcomes (including the Nash point) with higher ex-ante expected payoff than the Nash equilibrium payoff. We find that the subjects do not accept this lottery (which is a coarse correlated equilibrium); instead, they choose to play the game and coordinate on the Nash equilibrium. However, given an individual choice between a lottery with equal probabilities of the same outcomes and the sure payoff as in the Nash point, the lottery is chosen by the subjects. This result is robust against a few variations. We explain our result as selecting risk-dominance over payoff dominance in equilibrium.

Original languageEnglish
Pages (from-to)1178–1204
JournalExperimental economics
Volume23
Early online date20 Feb 2020
DOIs
Publication statusPublished - 01 Dec 2020
Externally publishedYes

Fingerprint

Dive into the research topics of 'Nash versus coarse correlation'. Together they form a unique fingerprint.

Cite this