Heterogeneous focal points, fairness, and coordination
Author
López Pérez, RaúlEntity
UAM. Departamento de Análisis Económico, Teoría Económica e Historia EconómicaPublisher
UAM. Departamento de Análisis Económico, Teoría Económica e Historia EconómicaDate
2007-08Serie/Num.
Economic analysis working papers series. 14/2007ISSN
1885-6888Subjects
Coordination; Equilibrium refinement; Fairness; Focal points; Heterogeneity; EconomíaAbstract
In games with multiple equilibria, the fairest equilibrium –in case one exists- may be the obvious solution for some players but not for others, and players can be aware of this heterogeneity. This paper theoretically explores how coordination could be achieved in this case. The model is consistent with abundant experimental evidence and explains, for instance, why (a) the attractiveness of the fair equilibrium, (b) out-of-equilibrium payoffs, (c) dominated strategies, and (d) the number of players and available strategies matter for coordination. The model is compared with alternative equilibrium selection criteria like risk and payoff dominance and ideas for new experiments are suggested.
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