Adam Smith Business School

Dr Katharina Janezic, University of Oxford

"Coordination and Sophistication"
Tuesday, 7 March. 4 pm
Room 709, Boyd Orr Building

Abstract

How coordination can be achieved in isolated, one-shot interactions without communication and in the absence of focal points is a long-standing question in game theory. We show that a cost-benefit approach to reasoning in strategic settings delivers sharp theoretical predictions that address this central question. In particular, our model predicts that, for a large class of individual reasoning processes, coordination in some canonical games is more likely to arise when players perceive heterogeneity in their cognitive abilities rather than homogeneity. In addition, and perhaps contrary to common perception, it is not necessarily the case that being of higher cognitive sophistication is beneficial to the agent: in some coordination games, the opposite is true. We show that subjects’ behaviour in a laboratory experiment is consistent with the predictions of this model and rejects alternative coordination mechanisms. Overall, the empirical results strongly support our model.

Bio

Katharina Janezic is an Associate Professor at the Department of Economics at the University of Oxford and a Tutorial Fellow at St Anne's College. Her research focuses on experimental and behavioural economics.

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First published: 28 February 2023