Heterogeneity as a coordination device

A model of directed search with a finite number of buyers and sellers is considered, where sellers compete in direct mechanisms. Buyer heterogeneity and Nash equilibrium results in perfect sorting. The restriction to complementary inputs, that the match value function Q is supermodular, in addition coordinates the sellers strategies. In that case, equilibrium implements positive assortative matching, which is efficient and consistent with the stable (cooperative equilibrium) outcome. This provides a non-cooperative and decentralizedsolution for the Assignment Game. Conversely, if buyers are identical, no such coordination is possible, and there is a continuum of equilibria, one of which exhibits price posting, another yields competition in auctions.

Measuring strategic uncertainty in coordination games

This paper explores three aspects of strategic uncertainty: its relation to risk, predictability of behavior and subjective beliefs of players. In a laboratory experiment we measure subjects certainty equivalents for three coordination games and one lottery. Behavior in coordination games is related to risk aversion, experience seeking, and age.From the distribution of certainty equivalents we estimate probabilities for successful coordination in a wide range of games. For many games, success of coordination is predictable with a reasonable error rate. The best response to observed behavior is close to the global-game solution. Comparing choices in coordination games with revealed risk aversion, we estimate subjective probabilities for successful coordination. In games with a low coordination requirement, most subjects underestimate the probability of success. In games with a high coordination requirement, most subjects overestimate this probability. Estimating probabilistic decision models, we show that the quality of predictions can be improved when individual characteristics are taken into account. Subjects behavior is consistent with probabilistic beliefs about the aggregate outcome, but inconsistent with probabilistic beliefs about individual behavior.

On the impact of fundamentals, liquidity and coordination on market stability

We develop a coordination game to model interactions betweenfundamentals and liquidity during unstable periods in financial markets.We then propose a flexible econometric framework for estimationof the model and analysis of its quantitative implications. The specificempirical application is carry trades in the yen dollar market, includingthe turmoil of 1998. We find a generally very deep market, withlow information disparities amongst agents. We observe occasionallyepisodes of market fragility, or turmoil with up by the escalator, downby the elevator patterns in prices. The key role of strategic behaviorin the econometric model is also confirmed.

The effect of intergroup competition on group coordination: An experimental study

We report an experiment on the effect of intergroup competition on group coordination in the minimal-effort game (Van Huyck et al., 1990). The competition was between two 7-person groups. Each player in each group independently chose an integer from 1 to 7. The group with the higher minimum won the competition and each of its members was paid according to the game s original payoff matrix. Members of the losing group were paid nothing. In case of a tie, each player was paid half the payoff in the original matrix. This treatment was contrasted with two control treatments where each of the two groups played an independent coordination game, either with or without information about the minimum chosen by the outgroup. Although the intergroup competition does not change the set of strict equilibria, we found that it improved collective rationality by moving group members in the direction of higher-payoff equilibria. Merely providing group members with information about the minimal-effort level in the other group was not sufficient to generate this effect.

Ex post bargaining, labor coordination and wage formation at the firm level

We lay out a model of wage bargaining with two leading features:bargaining is ex post to relevant investments and there isindividual bargaining in firms without a Union. We compareindividual ex post bargaining to coordinated ex post bargainingand we analyze the effects on wage formation. As opposed to exante bargaining models, the costs of destroying the employmentrelationship play a crucial role in determining wages. Highfiring costs in particular yield a rent for employees. Ourtheory points to a employer size-wage effect that is independentof the production function and market power. We derive a simpleleast squares specification from the theoretical model thatallow us to estimate components of the wage premium fromcoordination. We reject the hypothesis that labor coordinationdoes not alter the extensive form of the bargaining game. Laborcoordination substantially increases bargaining power butdecreases labor's ability to pose costly threats to the firm.

Communication, coordination and efficiency in evolutionary one-population models

We analyze the role of commitment in pre-play communication for ensuringefficient evolutionarily stable outcomes in coordination games. All players are a priori identical as they are drawn from the same population. In games where efficient outcomes can be reached by players coordinating on the same action we find commitment to be necessary to enforce efficiency. In games where efficienct outcomes only result from play of different actions, communication without commitment is most effective although efficiency can no longer be guaranteed. Only when there are many messages then inefficient outcomes are negligible as their basins of attraction become very small.

Equilibrium selection through incomplete information in coordination games: An experimental study

We perform an experiment on a pure coordination game with uncertaintyabout the payoffs. Our game is closely related to models that have beenused in many macroeconomic and financial applications to solve problemsof equilibrium indeterminacy. In our experiment each subject receives anoisy signal about the true payoffs. This game has a unique strategyprofile that survives the iterative deletion of strictly dominatedstrategies (thus a unique Nash equilibrium). The equilibrium outcomecoincides, on average, with the risk-dominant equilibrium outcome ofthe underlying coordination game. The behavior of the subjects convergesto the theoretical prediction after enough experience has been gained. The data (and the comments) suggest that subjects do not apply through"a priori" reasoning the iterated deletion of dominated strategies.Instead, they adapt to the responses of other players. Thus, the lengthof the learning phase clearly varies for the different signals. We alsotest behavior in a game without uncertainty as a benchmark case. The gamewith uncertainty is inspired by the "global" games of Carlsson and VanDamme (1993).

On the role of non-equilibrium focal points as coordination devices

Considering a pure coordination game with a large number of equivalentequilibria, we argue, first, that a focal point that is itself not a Nash equilibriumand is Pareto dominated by all Nash equilibria, may attract the players'choices. Second, we argue that such a non-equilibrium focal point may act asan equilibrium selection device that the players use to coordinate on a closelyrelated small subset of Nash equilibria. We present theoretical as well asexperimental support for these two new roles of focal points as coordinationdevices.

Disorder-induced critical phenomena in magnetically glassy Cu-Al-Mn alloys

Measurements of magnetic hysteresis loops in Cu-Al-Mn alloys of different Mn content at low temperatures are presented. The loops are smooth and continuous above a certain temperature, but exhibit a magnetization discontinuity below that temperature. Scaling analysis suggest that this system displays a disorder-induced phase transition line. Measurements allow one to determine the critical exponents ß=0.03±0.01 and ß¿=0.4±0.1, which coincide with those reported recently in a different system, thus supporting the existence of universality for disorder-induced critical points.

Anomalous roughening of Hele-Shaw flows with quenched disorder

The kinetic roughening of a stable oil-air interface moving in a Hele-Shaw cell that contains a quenched columnar disorder (tracks) has been studied. A capillary effect is responsible for the dynamic evolution of the resulting rough interface, which exhibits anomalous scaling. The three independent exponents needed to characterize the anomalous scaling are determined experimentally. The anomalous scaling is explained in terms of the initial acceleration and subsequent deceleration of the interface tips in the tracks coupled by mass conservation. A phenomenological model that reproduces the measured global and local exponents is introduced.

Influence of disorder strength on phase-field models of interfacial growth

We study the influence of disorder strength on the interface roughening process in a phase-field model with locally conserved dynamics. We consider two cases where the mobility coefficient multiplying the locally conserved current is either constant throughout the system (the two-sided model) or becomes zero in the phase into which the interface advances (one-sided model). In the limit of weak disorder, both models are completely equivalent and can reproduce the physical process of a fluid diffusively invading a porous media, where super-rough scaling of the interface fluctuations occurs. On the other hand, increasing disorder causes the scaling properties to change to intrinsic anomalous scaling. In the limit of strong disorder this behavior prevails for the one-sided model, whereas for the two-sided case, nucleation of domains in front of the invading front are observed.

Universality in models for disorder induced phase transitions

We have systematically analyzed six different reticular models with quenched disorder and no thermal fluctuations exhibiting a field-driven first-order phase transition. We have studied the nonequilibrium transition, appearing when varying the amount of disorder, characterized by the change from a discontinuous hysteresis cycle (with one or more large avalanches) to a smooth one (with only tiny avalanches). We have computed critical exponents using finite size scaling techniques and shown that they are consistent with universal values depending only on the space dimensionality d.