The Power of Focal Points Is Limited: Even Minute Payoff Asymmetry May Yield Large Coordination Failures
Vincent P. Crawford, Uri Gneezy and Yuval Rottenstreich
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| Article Citation |
Crawford, Vincent P., Uri Gneezy, and Yuval Rottenstreich. 2008. "The Power of Focal Points Is Limited: Even Minute Payoff Asymmetry May Yield Large Coordination Failures." American Economic Review, 98(4): 1443–58.
DOI:10.1257/aer.98.4.1443
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| Abstract |
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."
(JEL C72, C92)
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| Article Full-Text Access |
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| Additional Materials |
Link to Appendix
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| Authors |
Crawford, Vincent P. (U CA, San Diego)
Gneezy, Uri (U CA, San Diego)
Rottenstreich, Yuval (NYU)
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| JEL Classifications |
C72: Noncooperative Games
C92: Design of Experiments: Laboratory, Group Behavior
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