The Power of Focal Points Is Limited: Even Minute Payoff Asymmetry May Yield Large Coordination Failures

Since Schelling, it has often been assumed that players make use of salient decision labels to achieve coordination. Consistent with previous work, we find that given equal payoffs, salient labels yield frequent coordination. However, given even minutely asymmetric payoffs, labels lose much of their...

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Bibliographic Details
Published in:The American economic review Vol. 98; no. 4; pp. 1443 - 1458
Main Authors: Crawford, Vincent P., Gneezy, Uri, Rottenstreich, Yuval
Format: Journal Article
Language:English
Published: Nashville American Economic Association 01.09.2008
Subjects:
Asymmetry
Communication
Coordination
Coordination failures
Coordination games
Economic theory
Effectiveness
Equilibrium theory
Experiments
Focal points
Game theory
Group dynamics
High rise buildings
Labeling
Modeling
Pay-off
Payoffs
Policy co-ordination
Reasoning
Return on investment
Roles
Salience
Saliency
Studies
ISSN:0002-8282, 1944-7981
Online Access:Get full text
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Summary:Since Schelling, it has often been assumed that players make use of salient decision labels to achieve coordination. Consistent with previous work, we find that given equal payoffs, salient labels yield frequent coordination. However, given even minutely asymmetric payoffs, labels lose much of their effectiveness and miscoordination abounds. This raises questions about the extent to which the effectiveness of focal points based on label salience persists beyond the special case of symmetric games. The patterns of miscoordination we observe vary with the magnitude of payoff differences in intricate ways that suggest nonequilibrium accounts based on "level-k" thinking and "team reasoning."
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ISSN:0002-8282
1944-7981
DOI:10.1257/aer.98.4.1443