What Price Coordination? The Efficiency-Enhancing Effect of Auctioning the Right to Play
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CONTRIBUTORS:
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JOURNAL:
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YEAR:
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1998
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PUB TYPE:
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Journal Article
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SUBJECT(S):
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Stochastic-and-Dynamic-Games (C730); Auctions (D440); Auctions; -Bid; -Equilibria; -Equilibrium; -Games
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DISCIPLINE:
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No discipline assigned
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HTTP:
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LANGUAGE:
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English
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PUB ID:
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103-357-552
(Last edited on
2002/02/27 18:44:25 US/Mountain)
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SPONSOR(S):
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ABSTRACT:
A model is proposed to explain the results of recent experiments in which subjects repeatedly played a coordination game, with the right to play auctioned each period in a larger group. Subjects bid the market-clearing price to a level recoverable only in the efficient equilibrium and then converged to that equilibrium, although subjects playing the game without auctions converged to inefficient equilibria. The efficiency-enhancing effect of auctions is reminiscent of forward induction but is not explained by equilibrium refinements. The model explains it by showing how strategic uncertainty interacts with history-dependent learning dynamics to determine equilibrium selection.
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