Inequality in minimum-effort coordination

Christoph Feldhaus, Bettina Rockenbach and Christopher Zeppenfeld

VfS Annual Conference 2020 (Virtual Conference): Gender Economics from Verein für Socialpolitik / German Economic Association

Abstract: Successful coordination is key for economic and societal wealth. The rich literature on the minimum-effort game (MEG) has provided valuable insights into coordination, both theoretically and empirically. Yet, although real-world scenarios often involve asymmetric benefits and/or costs from coordination, most previous studies rely on symmetric MEGs. We investigate the effect of unequal equilibrium pay-offs in the MEG. In two experiments, we observe that players are better able to coordinate on an equal rather than an unequal Pareto-dominant equilibrium. We find that the ability to coordinate on the unequal Pareto-dominant equilibrium critically hinges on the costs of miscoordination for the player who benefits most from successful coordination: when her costs are low, she seems able to stabilize the Pareto-dominant equilibrium even if payoffs are highly unequal, whereas coordination success worsens substantially when her costs are high.

Keywords: minimum effort game; coordination; social comparison; potential games; lab experiment (search for similar items in EconPapers)
JEL-codes: C72 C92 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cbe, nep-exp and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc20:224650

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