Hostname: page-component-7b9c58cd5d-dlb68 Total loading time: 0 Render date: 2025-03-15T09:04:51.215Z Has data issue: false hasContentIssue false
  • English
  • Français

Coordination and learning in dynamic global games: experimental evidence

Published online by Cambridge University Press:  14 March 2025

Olga Shurchkov
Olga Shurchkov*
Affiliation:
Department of Economics, Wellesley College, 106 Central St. Wellesley, MA, USA
*
e-mail: [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Coordination problems are ubiquitous in social and economic life. Political mass demonstrations, the decision whether to join a speculative currency attack, investment in a risky venture, and capital flight from a particular country are all characterized by coordination problems. Furthermore, all these events have a dynamic nature which has been largely omitted from previous experimental studies. Here I use a two-stage variant of a dynamic global game to study experimentally how the arrival of information in a dynamic setting affects the relative aggressiveness of speculators. In the first stage, subjects exhibit excess aggressiveness, which appears to be driven by beliefs about others’ actions rather than an intrinsic taste for attacking. However, following a failed first-stage attack, subjects learn to be less aggressive in the second stage. On the other hand, the arrival of new, more precise information after a failed attack leads to an increase in subjects’ aggressiveness. Beliefs, again, play a crucial role in explaining how the arrival of information affects attacking behavior.

Keywords

CoordinationLearningDynamicsGlobal gamesCrisesBeliefsExcess aggressivenessExperimental economics

JEL classification

C7: Game Theory and Bargaining Theory D8: Information, Knowledge, and Uncertainty C9: Design of Experiments F3: International Finance
Type
Original Paper
Information
Experimental Economics , Volume 16 , Issue 3 , September 2013 , pp. 313 - 334
Copyright
Copyright © 2012 Economic Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I am especially grateful to George-Marios Angeletos and Ernst Fehr for their invaluable insights and support throughout this project. Casey Rothschild has offered a tremendous level of guidance in the analysis and application of the theory. In addition, I would like to thank Ernst Fehr and the University of Zurich for providing the resources and the financial support without which this study would not be possible. I would also like to thank Daron Acemoglu, Miriam Bruhn, James Costain, Florian Ederer, Muhamet Yildiz, Akila Weerapana, and the seminar participants and organizers of the MIT macroeconomics workshop, Wellesley College Calderwood seminar, the IESE Conference on Complementarities and Information, the 2007 SAET conference, the conference of the French Economic Association on Behavioral Economics and Experiments, the ESA World Meeting 2007, and the 22nd World Congress of the EEA for valuable comments and discussion. All remaining errors are my own.

References

Angeletos, G.-M., Hellwig, C., & Pavan, A. (2007). Dynamic global games of regime change: learning, multiplicity, and timing of attacks. Econometrica, 75(3), 711–756. 10.1111/j.1468-0262.2007.00766.xCrossRefGoogle Scholar
Arifovic, J., & Maschek, M. (2012). Currency crisis: evolution of beliefs, real world data and policy experiments. Journal of Economic Behavior & Organization, 82, 131–150. 10.1016/j.jebo.2012.01.001CrossRefGoogle Scholar
Atkeson, A. (2000). Discussion of Morris and Shin’s ‘Rethinking multiple equilibria in macroeconomic modelling’. NBER Macroeconomics Annual.CrossRefGoogle Scholar
Blanco, M., Engelmann, D., Koch, A. K., & Normann, H.-T. (2010). Belief elicitation in experiments: is there a hedging problem?. Experimental Economics, 13(4), 412–438. 10.1007/s10683-010-9249-1CrossRefGoogle Scholar
Brunnermeier, M. K., & Morgan, J. (2010). Clock games: theory and experiments. Games and Economic Behavior, 68(2), 532–550. 10.1016/j.geb.2009.09.005CrossRefGoogle Scholar
Cabrales, A., Nagel, R., & Armenter, R. (2007). Equilibrium selection though incomplete information in coordination games: an experimental study. Experimental Economics, 10(3), 221–234. 10.1007/s10683-007-9183-zCrossRefGoogle Scholar
Carlsson, H., & van Damme, E. (1993). Global games and equilibrium selection. Econometrica, 61(5), 989–1018. 10.2307/2951491CrossRefGoogle Scholar
Carlsson, H., van Damme, E. Binmore, K., Kirman, A., & Tani, P. (1993). Equilibrium selection in stag hunt games. Frontiers of game theory, Cambridge: MIT Press 237–253.Google Scholar
Chamberlain, G. (1980). Analysis of covariance with qualitative data. Review of Economic Studies, 47, 225–238. 10.2307/2297110CrossRefGoogle Scholar
Chamley, C. (1999). Coordinating regime switches. Quarterly Journal of Economics, 114(3), 869–905. 10.1162/003355399556160CrossRefGoogle Scholar
Chen, Q., Goldstein, I., & Jiang, W. (2010). Payoff complementarities and financial fragility: evidence from mutual fund outflows. Journal of Financial Economics, 97(2), 239–262. 10.1016/j.jfineco.2010.03.016CrossRefGoogle Scholar
Cheung, Y.-W., & Friedman, D. (2009). Speculative attacks: a laboratory study in continuous time. Journal of International Money and Finance, 28(6), 1064–1082. 10.1016/j.jimonfin.2008.08.006CrossRefGoogle Scholar
Cooper, R. W., DeJong, D. V., Forsythe, R., & Ross, T. W. (1990). Selection criteria in coordination games: some experimental results. American Economic Review, 80(1), 218–233.Google Scholar
Cooper, R. W., DeJong, D. V., Forsythe, R., & Ross, T. W. (1992). Communication in coordination games. Quarterly Journal of Economics, 107(2), 739–771. 10.2307/2118488CrossRefGoogle Scholar
Cornand, C., & Heinemann, F. (2010). Measuring agents’ reaction to private and public information in games with strategic complementarities. CESifo Working Paper Series 2947.CrossRefGoogle Scholar
Corsetti, G., & Guimaraes, B. Roubini, N. (2003). International lending of last resort and moral hazard: a model of IMF’s catalytic finance. NBER Working Paper 10125.CrossRefGoogle Scholar
Costain, J. S., & Heinemann, F. Ockenfels, P. (2007). Multiple outcomes of speculative behavior in theory and in the laboratory. Bank of Spain working paper.Google Scholar
Costa-Gomes, M., & Weizsäcker, G. (2008). Stated beliefs and play in normal form games. Review of Economic Studies, 75, 729–762. 10.1111/j.1467-937X.2008.00498.xCrossRefGoogle Scholar
Danielsson, J., & Peñaranda, F. (2011). On the impact of fundamentals, liquidity and coordination on market stability. International Economic Review, 52(3), 621–638. 10.1111/j.1468-2354.2011.00642.xCrossRefGoogle Scholar
Edmond, C. (2008). Information revolutions and the overthrow of autocratic regimes. Mimeo, New York University.Google Scholar
Fehr, E., & Tyran, J.-R. (2005). Individual irrationality and aggregate outcomes. Journal of Economic Perspectives, 19(4), 43–66. 10.1257/089533005775196651CrossRefGoogle Scholar
Fehr, E., & Tyran, J.-R. (2008). Limited rationality and strategic interaction—the impact of the strategic environment on nominal inertia. Econometrica, 76(2), 353–394.CrossRefGoogle Scholar
Fischbacher, U. (2007). z-Tree: zurich toolbox for ready-made economic experiments. Experimental Economics, 10(2), 171–178. 10.1007/s10683-006-9159-4CrossRefGoogle Scholar
Gächter, S., & Renner, E. (2010). The effects of (incentivized) belief elicitation in public goods experiments. Discussion Papers 2010-12, The Centre for Decision Research and Experimental Economics, University of Nottingham.CrossRefGoogle Scholar
Goldstein, I., & Pauzner, A. (2004). Contagion of self-fulfilling financial crises due to diversification of investment portfolios. Journal of Economic Theory, 119(1), 151–183. 10.1016/j.jet.2004.03.004CrossRefGoogle Scholar
Haltiwanger, J. C., & Waldman, M. (1985). Rational expectations and the limits of rationality: an analysis of heterogeneity. American Economic Review, 75(3), 326–340.Google Scholar
Haltiwanger, J. C., & Waldman, M. (1989). Limited rationality and strategic complements: the implications for macroeconomics. Quarterly Journal of Economics, 104(3), 463–483. 10.2307/2937806CrossRefGoogle Scholar
Heinemann, F., Nagel, R., & Ockenfels, P. (2004). The theory of global games on test: experimental analysis of coordination games with public and private information. Econometrica, 72(5), 1583–1599. 10.1111/j.1468-0262.2004.00544.xCrossRefGoogle Scholar
Heinemann, F., Nagel, R., & Ockenfels, P. (2009). Measuring strategic uncertainty in coordination games. Review of Economic Studies, 76, 181–221. 10.1111/j.1467-937X.2008.00512.xCrossRefGoogle Scholar
IMF. (2000). Recovery from the Asian crisis and the role of the IMF.Google Scholar
Izmalkov, S., & Yildiz, M. (2010). Investor sentiments. American Economic Journal: Microeconomics, 2(1), 21–38. 10.1257/mic.2.1.21Google Scholar
Morris, S., & Shin, H. S. (1998). Unique equilibrium in a model of self-fulfilling currency attacks. American Economic Review, 88(3), 587–597.Google Scholar
Morris, S., & Shin, H. S. (2004). Coordination risk and the price of debt. European Economic Review, 48, 133–153. 10.1016/S0014-2921(02)00239-8CrossRefGoogle Scholar
Obstfeld, M. (1996). Models of currency crises with self-fulfilling features. European Economic Review, 40(3–5), 1037–1047. 10.1016/0014-2921(95)00111-5CrossRefGoogle Scholar
Prati, A., & Sbracia, M. (2002). Currency crisis and uncertainty about fundamentals. Economic working papers, 446, Bank of Italy.Google Scholar
Rochet, J., & Vives, X. (2004). Coordination failures and the lender of last resort: was Bagehot right after all?. Journal of the European Economic Association, 2(6), 1116–1147. 10.1162/1542476042813850CrossRefGoogle Scholar
Schotter, A., & Yorulmazer, T. (2009). On the dynamics and severity of bank runs: an experimental study. Journal of Financial Intermediation, 18(2), 217–241. 10.1016/j.jfi.2008.06.002CrossRefGoogle Scholar
Schmidt, D., Shupp, R., Walker, J. M., & Ostrom, E. (2003). Playing safe in coordination games: the roles of risk dominance, payoff dominance, and history of play. Games and Economic Behavior, 42, 281–299. 10.1016/S0899-8256(02)00552-3CrossRefGoogle Scholar
Shurchkov, O. (2008). Effects of one-sided communication on coordination and equilibrium selection in dynamic global games: experimental evidence. Mimeo, MIT.Google Scholar
Van Huyck, J. B., Battalio, R. C., & Beil, R. O. (1990). Tacit coordination games, strategic uncertainty, and coordination failure. American Economic Review, 80(1), 234–248.Google Scholar
Wang, S. W. (2011). Incentive effects: the case of belief elicitation from individuals in groups. Economics Letters, 111, 30–33. 10.1016/j.econlet.2010.11.045CrossRefGoogle Scholar