Rational coordination with no communication or conventions

Rational Coordination with no Communication or Conventions

We study pure coordination games where in every outcome, all players have identical payoffs, ‘win’ or ‘lose’. We identify and discuss a range of ‘purely rational principles’ guiding the reasoning of rational players in such games and analyze which classes of coordination games can be solved by such players with no preplay communication or conventions. We observe that it is highly nontrivial to ...

Types of coordination via conventions

Coordination with Rational Inattention

We study information acquisition in a coordination game with incomplete information. To capture the idea that players can exibly decide what information to acquire, we do not impose any physical restriction on feasible information structure. Facing an informational cost measured by reduction of Shannon's entropy, players collect information most relevant to their welfare and are rationally inat...

Parallel Search with No Coordination

We consider a parallel version of a classical Bayesian search problem. k agents are looking for a treasure that is placed in one of the boxes indexed by N according to a known distribution p. The aim is to minimize the expected time until the first agent finds it. Searchers run in parallel where at each time step each searcher can “peek” into a box. A basic family of algorithms which are inhere...

Rational Markets: Yes or No? The Affirmative Case

This paper presents the logic behind the increasingly neglected proposition that prices set in developed financial markets are determined as if all investors are rational. It contends that realistically, market rationality needs to be defined so as to allow investors to be uncertain about the characteristics of other investors in the market. It also argues that investor irrationality, to the ex...