We investigate, experimentally, the effects of leadership in a four player weak-link game. A weak-link game is a coordination game with multiple Pareto-ranked Nash equilibria. Because the more efficient equilibria involve a degree of strategic uncertainty groups typically find it difficult to...

In classical game theory, players have finitely many actions and evaluate outcomes of mixed strategies using a von Neumann-Morgenstern utility function. Allowing a larger, but countable, player set introduces a host of phenomena that are impossible in finite games. Firstly, in coordination...

Precedents can facilitate successful coordination within groups by reducing strategic uncertainty, but they may lead to coordination failure when two groups with diverging precedents have to interact. This paper describes an experiment to explore how such coordination failure can be mitigated...

We present an experiment in which extrinsic information (signals) may generate sunspot equilibria. The underlying coordination game has a unique symmetric non-sunspot equilibrium, which is also risk-dominant. Other equilibria can be ordered according to risk dominance. We compare treatments with...

Seit langem strebt die Finanzpolitik das Ziel eines ausgeglichenen Haushalts an. Ist dies jeweils mit den übrigen gesamtwirtschaftlichen Zielen vereinbar? Hat es in Deutschland in der Vergangenheit eine Makropolitik aus einem Guss gegeben? Wie sollte eine solche verzahnte Finanzpolitik aussehen?

This paper addresses the effectiveness of fiscal policy at zero nominal interest rates. I analyze a stochastic general equilibrium model with sticky prices and rational expectations and assume that the government cannot commit to future policy. Real government spending increases demand by...

This paper analyzes how the formation of expectations constrains monetary and fiscal policy design. Economic agents have imperfect knowledge about the economic environment and the policy regime in place. Households and firms learn about the policy regime using historical data. Regime uncertainty...

Considering a pure coordination game with a large number of equivalent equilibria, we argue, first, that a focal point that is itself not a Nash equilibrium and is Pareto dominated by all Nash equilibria, may attract the players' choices. Second, we argue that such a non-equilibrium focal point...

This paper develops a simple model to examine the interaction between partner choice and individual behavior in games of coordination. An important ingredient of our approach is the way we model partner choice: we suppose that a player can establish ties with other players by unilaterally...

In most models of transboundary pollution, lack of international cooperation does not cause any inefficiency within each country. The paper shows that this result is only valid in the hypothetical case of no international trade. With international trade, we get a domestic inefficiency in...