The value of a coordination game

Willemien Kets; Wouter Kager; Alvaro Sandroni

doi:10.1016/j.jet.2022.105419

The value of a coordination game

Willemien Kets^*, Wouter Kager, Alvaro Sandroni

^*Corresponding author for this work

Managerial Economics, Decision Sciences and Operations

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

Abstract

The value of a game is the payoff a player can expect (ex ante) from playing the game. Understanding how the value changes with economic primitives is critical for policy design and welfare. However, for games with multiple equilibria, the value is difficult to determine. We therefore develop a new theory of the value of coordination games. The theory delivers testable comparative statics on the value and delivers novel insights relevant to policy design. For example, policies that shift behavior in the desired direction can make everyone worse off, and policies that increase everyone's payoffs can reduce welfare.

Original language	English (US)
Article number	105419
Journal	Journal of Economic Theory
Volume	201
DOIs	https://doi.org/10.1016/j.jet.2022.105419
State	Published - Apr 2022

Funding

We are grateful to the Associate Editor and two anonymous referees for excellent suggestions. We thank Larbi Alaoui, Miguel Ballester, Larry Blume, Vincent Crawford, David Gill, Meg Meyer, Antonio Penta, David Schmeidler, Jakub Steiner, Colin Stewart, and numerous seminar audiences for helpful comments and stimulating discussions. Luzia Bruckamp provided excellent research assistance.

Keywords

Comparative statics on welfare
Coordination
Policy design
Strategic complementarities
Supermodular games
Value

ASJC Scopus subject areas

Economics and Econometrics

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10.1016/j.jet.2022.105419

Cite this

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abstract = "The value of a game is the payoff a player can expect (ex ante) from playing the game. Understanding how the value changes with economic primitives is critical for policy design and welfare. However, for games with multiple equilibria, the value is difficult to determine. We therefore develop a new theory of the value of coordination games. The theory delivers testable comparative statics on the value and delivers novel insights relevant to policy design. For example, policies that shift behavior in the desired direction can make everyone worse off, and policies that increase everyone's payoffs can reduce welfare.",

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N2 - The value of a game is the payoff a player can expect (ex ante) from playing the game. Understanding how the value changes with economic primitives is critical for policy design and welfare. However, for games with multiple equilibria, the value is difficult to determine. We therefore develop a new theory of the value of coordination games. The theory delivers testable comparative statics on the value and delivers novel insights relevant to policy design. For example, policies that shift behavior in the desired direction can make everyone worse off, and policies that increase everyone's payoffs can reduce welfare.

AB - The value of a game is the payoff a player can expect (ex ante) from playing the game. Understanding how the value changes with economic primitives is critical for policy design and welfare. However, for games with multiple equilibria, the value is difficult to determine. We therefore develop a new theory of the value of coordination games. The theory delivers testable comparative statics on the value and delivers novel insights relevant to policy design. For example, policies that shift behavior in the desired direction can make everyone worse off, and policies that increase everyone's payoffs can reduce welfare.

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The value of a coordination game

Abstract

Funding

Keywords

ASJC Scopus subject areas

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