An Experimental Study Of Uncertainty In Coordination Games

Global games and Poisson games have been proposed to address equilibrium indeterminacy in Common Knowledge Coordination games, where fundamentals are commonly known by all players. Global games assume that agents face idiosyncratic uncertainty about economic fundamentals, whereas Poisson games model the number of actual players as a Poisson random variable to capture population uncertainty in large games. The present study investigates in a controlled setup, using as controls Common Knowledge Coordination games, whether idiosyncratic uncertainty about economic fundamentals or uncertainty about the number of actual players may influence subjects’ behavior. Our findings suggest that uncertainty about the number of actual players has a more significant impact on subjects’ behavior than idiosyncratic uncertainty about economic fundamentals. Furthermore, subjects’ behavior under Poisson population-size uncertainty is consistent with the theoretical prediction of Poisson Coordination games. JEL: C72, C92, D71, D82