Competition as a coordination device: Experimental evidence from a minimum effort coordination game

This paper presents a means of fostering efficient coordination in minimum effort coordination games, inter-group competition. In a series of laboratory experiments, we reveal that the true reason for coordination failure is strategic uncertainty, which can be reduced almost completely by introducing an appropriately designed mechanism of (inter-group) competition. We uncover the reasons why competition works as a coordination device and how the mechanism of competition should be designed in order to achieve a maximum degree of efficiency.