Communication And Efficiency In Competitive Coordination Games

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Executive Summary

Costless pre-play communication has been found to effectively facilitate coordination and enhance efficiency in games with Pareto-ranked equilibria. The authors report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. Allowing intra-group communication leads to more aggressive competition and greater coordination than control treatments without any communication. On the other hand, allowing inter-group communication leads to less destructive competition. As a result, intra-group communication decreases while inter-group communication increases payoffs. The experiment thus provides evidence that communication can either reduce or increase efficiency in competitive coordination games depending on different communication boundaries.

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