SFI News:

Wednesday, Feb. 20 • 12:15 p.m. • Collins Conference Room in the Santa Fe Institute at 1399 Hyde Park Road in Santa Fe.

Martin Strobel, Department of Economics, Maastricht University, will present “Efficient Coordination in Weakest Link Games.”

Abstract: Coordination problems resembling weakest-link games are ubiquitous in the economy and society. Since they possess Pareto ranked equilibria it is important to understand if and when agents are able to coordinate on the efficient equilibrium.

Existing research on weakest-link games shows an overwhelming inability of people to coordinate on the efficient equilibrium, especially in larger groups.

We show experimentally that freedom of neighborhood choice overcomes the problem and leads to fully efficient coordination, irrespective of group size.

This implies substantial welfare effects with achieved welfare being 40 to 60 percent higher in games with neighborhood choice than without neighborhood choice.

We identify exclusion of low effort providers who in response start providing high effort as the simple but effective mechanism enforcing efficient coordination. Our results are widely applicable on the societal and organizational level, e.g. containment of diseases, fight against terrorism, co-authorship networks.

Authors: Arno Riedl, Ingrid M.T. Rohde, and Martin Strobel

Note: We are unable to accommodate members of the public for SFI’s limited lunch service; you’re welcome to bring your own.

SFI Host: Jennifer Dunne

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