Published August 18, 2017
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Loss Avoidance and Forward Induction in Experimental Coordination Games
- Creators
- Cachon, GĂ©rard P.
- Camerer, Colin F.
Abstract
We report experiments on how players select among multiple Pareto-ranked equilibria in a coordination game. Subjects initially choose inefficient equilibria. Charging a fee to play (which makes initial equilibria money-losing) creates coordination on better equilibria. When fees are optional, improved coordination is consistent with forward induction. But coordination improves even when subjects must pay the fee (forward induction does not apply). Subjects appear to use a "loss-avoidance" selection principle: they expect others to avoid strategies that always result in losses. Loss-avoidance implies that "mental accounting" of out- comes can affect choices in games.
Additional Information
Abstract obtained from published version of this article. Published as Cachon, Gerard P., and Colin F. Camerer. "Loss-avoidance and forward induction in experimental coordination games." The Quarterly Journal of Economics 111.1 (1996): 165-194.Attached Files
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Additional details
- Eprint ID
- 80585
- Resolver ID
- CaltechAUTHORS:20170817-160321150
- Created
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2017-08-18Created from EPrint's datestamp field
- Updated
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2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 937