Communication and efficiency in competitive coordination games

Costless pre-play communication has been found to effectively facilitate coordination and enhance efficiency in games with Pareto-ranked equilibria. We report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. Allowing intra-group communication leads to more aggressive competition and greater coordination than control treatments without any communication. On the other hand, allowing inter-group communication leads to less destructive competition. As a result, intra-group communication decreases while inter-group communication increases payoffs. Our experiment thus provides an example of an environment where communication can either enhance or damage efficiency. This contrasts sharply with experimental findings from public goods and other coordination games, where communication always enhances efficiency and often leads to socially optimal outcomes. DOI: https://doi.org/10.1016/j.geb.2012.05.001 Posted at the Zurich Open Repository and Archive, University of Zurich ZORA URL: https://doi.org/10.5167/uzh-72270 Accepted Version Originally published at: Cason, Timothy N; Sheremeta, Roman M; Zhang, Jingjing (2012). Communication and efficiency in competitive coordination games. Games and Economic Behavior, 76(1):26 43. DOI: https://doi.org/10.1016/j.geb.2012.05.001 Communication and Efficiency in Competitive Coordination Games Timothy N. Cason, Roman M. Sheremeta, and Jingjing Zhang Department of Economics, Krannert School of Management, Purdue University, 403 W. State St., West Lafayette, IN 47906-2056, U.S.A. Argyros School of Business and Economics, Chapman University, One University Drive, Orange, CA 92866, U.S.A. Chair for Organizational Design, Department of Economics, University of Zurich, Blümlisalpstrasse 10, CH-8006, Zürich, Switzerland