A Model of Behavior in Coordination Game Experiments

This paper constructs a structural model for behavior in expeiments where subjects play a simple coordination game repeatedly under a rotating partner scheme. The model assumes subjects' actions are stochastic best responses to beliefs about opponents' choices, and these beliefs update as subjects observe actual choices during the experiment. The model accounts for heterogeneity across subjects by regarding prior beliefs as random effects and estimating their distribution. Maximum likelihood estimates from experimental data suggest that distributions of initial beliefs vary across games, but in all games studied imply a convergence dynamic toward risk-dominant equilibrium. Copyright Kluwer Academic Publishers 1999