Global versus local interaction in coordination games: an experimental investigation.

We study experimentally the outcome of a 50 periods repetition of a two-player coordination game, which admits two-pure strategy Nash equilibria that are Pareto-ranked: a payoff-dominant equilibrium and a risk-dominant equilibrium. The experiment consists of a 2x3 factorial design, with two different matching rules –global an local interaction–, and three sizes for the basin of attraction of the risk-dominant equilibrium. Under global interaction, each player can be matched in each period with any player in the population. Under local interaction, each player can be matched only with one of his two neighbours. Our results confirm earlier experimental results obtained under global interaction (for a survey see Ochs (1995)). On the contrary, the results contrast sharply with Keser, Ehrhart & Berninghaus (1998), who found that subjects interacting ‘locally’ with their neighbours around a circle, coordinate mostly on the risk-dominant equilibrium. Moreover, we found no evidence for a faster convergence to an equilibrium under local interaction than under global interaction. Keywords: Coordination games, Experimental economics, Evolutionary game theory, Local interactions