Working Paper (SSRN)

Abstract

We investigate the effect of absence of common knowledge on the outcomes of coordination games in a laboratory experiment. Using cognitive types, we can explain coordination failure in pure coordination games while differentiating between coordination failure due to first- and higher-order beliefs.
In our experiment, around 76 % of the players have chosen the payoff-dominant equilibrium strategy despite the absence of common knowledge.
However, 9.33 % of the players had first-order beliefs that lead to coordination failure and another 9.33 % exhibited coordination failure due to higher-order beliefs.