Nash versus coarse correlation

Georgalos, Konstantinos, Ray, Indrajit ORCID: https://orcid.org/0000-0001-5254-3144 and SenGupta, Sonali 2020. Nash versus coarse correlation. Experimental Economics 23 , pp. 1178-1204. 10.1007/s10683-020-09647-x

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Abstract

We run a laboratory experiment to test the concept of coarse correlated equilibrium (Moulin and Vial in Int J Game Theory 7:201–221, 1978), with a two-person game with unique pure Nash equilibrium which is also the solution of iterative elimination of strictly dominated strategies. The subjects are asked to commit to a device that randomly picks one of three symmetric outcomes (including the Nash point) with higher ex-ante expected payoff than the Nash equilibrium payoff. We find that the subjects do not accept this lottery (which is a coarse correlated equilibrium); instead, they choose to play the game and coordinate on the Nash equilibrium. However, given an individual choice between a lottery with equal probabilities of the same outcomes and the sure payoff as in the Nash point, the lottery is chosen by the subjects. This result is robust against a few variations. We explain our result as selecting risk-dominance over payoff dominance in equilibrium.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Publisher:	Springer Verlag (Germany)
ISSN:	1386-4157
Date of First Compliant Deposit:	2 March 2020
Date of Acceptance:	3 February 2020
Last Modified:	04 May 2023 04:43
URI:	https://orca.cardiff.ac.uk/id/eprint/130045

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