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Ala Avoyan

New York University, USA

Author: Ala Avoyan

Abstract: This paper introduces communication as a strategic choice in global games. To study the effects of communication, I consider four protocols (three one-round and one multi-round) and I characterize the resulting equilibria. The theory provides clear predictions, which are then tested in an experimental setting. Theoretically, all of the communication protocols studied in this paper equally improve welfare above that attainable without communication. This welfare improvement is achieved by reducing miscoordination and by allowing agents to select the payoff dominant as opposed to the risk-dominant equilibrium. The experimental results demonstrate that the multi-round protocol provides significantly higher welfare, while one-round communication has mixed effect.

Full Text:  “Communication In Global Games: Theory and Experiment”