Hostname: page-component-7b9c58cd5d-dkgms Total loading time: 0 Render date: 2025-03-15T16:02:11.421Z Has data issue: false hasContentIssue false
  • English
  • Français

The importance of higher-order beliefs to successful coordination

Published online by Cambridge University Press:  14 March 2025

Steven J. Bosworth
Steven J. Bosworth*
Affiliation:
Kiel Institute for the World Economy, Kiellinie 66, 24105 Kiel, Germany
*
[email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

Beliefs about other players’ strategies are crucial in determining outcomes for coordination games. If players are to coordinate on an efficient equilibrium, they must believe that others will coordinate with them. In many settings there is uncertainty about beliefs as well as strategies. Do people consider these “higher-order” beliefs (beliefs about beliefs) when making coordination decisions? I design a modified stag hunt experiment that allows me to identify how these higher-order beliefs and uncertainty about higher-order beliefs matter for coordination. Players prefer to invest especially when they believe that others are “optimistic” that they will invest; but knowledge that others think them unlikely to invest does not cause players to behave differently than when they do not know what their partners think about them. Thus resolving uncertainty about beliefs can result in marked efficiency gains.

Keywords

Stag huntCoordinationHigher-order beliefsC72C91C92D83
Type
Original Paper
Information
Experimental Economics , Volume 20 , Issue 1 , March 2017 , pp. 237 - 258
Copyright
Copyright © 2016 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

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-016-9483-2) contains supplementary material, which is available to authorized users.

“He who does not trust enough, Will not be trusted” – Lao Zi

References

Alesina, A, Baqir, R, & Easterly, W (1999). Public goods and ethnic divisions. Quarterly Journal of Economics, 114(4), 1243–1284. 10.1162/003355399556269CrossRefGoogle Scholar
Alesina, A, & La Ferrara, E (2000). Participation in heterogeneous communities. Quarterly Journal of Economics, 115(3), 847–904. 10.1162/003355300554935CrossRefGoogle Scholar
Alesina, A, & La Ferrara, E (2002). Who trusts others?. Journal of Public Economics, 85(2), 207–234. 10.1016/S0047-2727(01)00084-6CrossRefGoogle Scholar
Anctil, RM, Dickhaut, J, Kanodia, C, & Shapiro, B (2004). Information transparency and coordination failure: Theory and experiment. Journal of Accounting Research, 42(2), 159–195. 10.1111/j.1475-679X.2004.00134.xCrossRefGoogle Scholar
Baeriswyl, R, & Cornand, C (2014). Reducing overreaction to central banks’ disclosures: Theory and experiment. Journal of the European Economic Association, 12(4), 1087–1126. 10.1111/jeea.12077CrossRefGoogle Scholar
Blanco, M, Engelmann, D, Koch, AK, & 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
Cabrales, A, Nagel, R, & Armenter, R (2007). Equilibrium selection through incomplete information in coordination games: An experimental study. Experimental Economics, 10(3), 221–234. 10.1007/s10683-007-9183-zCrossRefGoogle Scholar
Cameron, AC, & Trivedi, PK (2005). Microeconometrics: Methods and applications, Cambridge: Cambridge University Press 10.1017/CBO9780511811241CrossRefGoogle Scholar
Carlsson, H, & van Damme, E (1993). Global games and equilibrium selection. Econometrica, 61(5), 989–1018. 10.2307/2951491CrossRefGoogle Scholar
Cooper, R, De Jong, D, Forsythe, R, & Ross, T (1990). Selection criteria in coordination games: Some experimental results. American Economic Review, 80(1), 218–233.Google Scholar
Cornand, C, & Heinemann, F (2014). Measuring agents’ reaction to private and public information in games with strategic complementarities. Experimental Economics, 17(1), 61–77. 10.1007/s10683-013-9357-9CrossRefGoogle Scholar
Devetag, G, & Ortmann, A (2007). When and why? A critical survey on coordination failure in the laboratory. Experimental Economics, 10(3), 331–344. 10.1007/s10683-007-9178-9CrossRefGoogle Scholar
Dugar, S (2010). Nonmonetary sanctions and rewards in an experimental coordination game. Journal of Economic Behavior & Organization, 73(3), 377–386. 10.1016/j.jebo.2009.11.003CrossRefGoogle Scholar
Greiff, M., & Paetzel, F. (2016). Second-order beliefs in reputation systems with endogenous evaluations: An experimental study. Games and Economic Behavior (in press).CrossRefGoogle Scholar
Harsanyi, J. C. (1967). Games with incomplete information played by ‘Bayesian’ players, Parts I, II, III. Management Science, Vol. 14, pp. 159–182, 320–334, 486–502.CrossRefGoogle Scholar
Harsanyi, JC, & Selten, R (1988). A general theory of equilibrium selection in games, Cambridge, MA: MIT Press.Google Scholar
Heinemann, F, Nagel, R, & Ockenfels, PC (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, PC (2009). Measuring strategic uncertainty in coordination games. Review of Economic Studies, 76(1), 181–221. 10.1111/j.1467-937X.2008.00512.xCrossRefGoogle Scholar
Hyndman, K, Terracol, A, & Vaksmann, J (2009). Learning and sophistication in coordination games. Experimental Economics, 12(4), 450–472. 10.1007/s10683-009-9223-yCrossRefGoogle Scholar
Kneeland, T (2016). Coordination under limited depth of reasoning. Games and Economic Behavior, 96, 49–64. 10.1016/j.geb.2015.12.011CrossRefGoogle Scholar
López-Pérez, R, Pintér, Á, & Kiss, HJ (2015). Does payoff equity facilitate coordination? A test of Schelling’s conjecture. Journal of Economic Behavior & Organization, 117, 209–222. 10.1016/j.jebo.2015.06.008CrossRefGoogle Scholar
Manski, CF, & Neri, C (2013). First- and second-order subjective expectations in strategic decision-making: Experimental evidence. Games and Economic Behavior, 81, 232–254. 10.1016/j.geb.2013.06.001CrossRefGoogle Scholar
Morris, S, & Shin, HS (2002). The social value of public information. American Economic Review, 92(5), 1522–1534. 10.1257/000282802762024610CrossRefGoogle Scholar
Morris, S, Shin, HS Dewatripont, M, Hansen, LP, & Turnovsky, SJ (2003). Global games: Theory and applications. Advances in economics and econometrics: Theory and applications, eighth world congress, Cambridge: Cambridge University Press 56–114. 10.1017/CBO9780511610240.004CrossRefGoogle Scholar
Polonio, L, Di Guida, S, & Coricelli, G (2015). Strategic sophistication and attention in games: An eye-tracking study. Games and Economic Behavior, 94, 80–96. 10.1016/j.geb.2015.09.003CrossRefGoogle Scholar
Putnam, RD (2007). E pluribus unum: Diversity and community in the twenty-first century. Scandinavian Political Studies, 30(2), 137–174. 10.1111/j.1467-9477.2007.00176.xCrossRefGoogle Scholar
Shapiro, D, Shi, X, & Zillante, A (2014). Level-k reasoning in a generalized beauty contest. Games and Economic Behavior, 86, 308–329. 10.1016/j.geb.2014.04.002CrossRefGoogle Scholar
Supplementary material: File

Bosworth supplementary material

Bosworth supplementary material 1
Download Bosworth supplementary material(File)
File 30.1 KB
Supplementary material: File

Bosworth supplementary material

Bosworth supplementary material 2
Download Bosworth supplementary material(File)
File 30.1 KB
Supplementary material: File

Bosworth supplementary material

Bosworth supplementary material 3
Download Bosworth supplementary material(File)
File 26.6 KB
Supplementary material: File

Bosworth supplementary material

Bosworth supplementary material 4
Download Bosworth supplementary material(File)
File 26.5 KB