Imperfect Common Knowledge of Preferences in Global Coordination Games∗

I study a simple global game, in which I relax the assumption that preferences are common knowledge. I show that with higher-order uncertainty regarding preferences, players can at best coordinate on the risk-dominant equilibrium, regardless of whether information about fundamentals is common or private. The example also suggests that the strength of the coordinating effect of public information depends positively on the degree of common knowledge regarding preferences. I conclude by reinterpreting recent experimental results in the light of this example, and suggest alternative experimental designs to test for the effects of informational assumptions, as well as the importance of common knowledge regarding preferences.