Scandinavian Working Papers in Economics

UiS Working Papers in Economics and Finance,
University of Stavanger

No 2021/2: On the empirical relevance of correlated equilibrium

Dan Friedman, Jean Paul Rabanal (jeanpaul.rabanal@uis.no), Olga A Rud (olga.rud@uis.no) and Shuchen Zhao
Additional contact information
Jean Paul Rabanal: University of Stavanger, Postal: University of Stavanger, NO-4036 Stavanger, Norway
Olga A Rud: University of Stavanger, Postal: University of Stavanger, NO-4036 Stavanger, Norway

Abstract: Can an efficient correlated equilibrium emerge without any exogenous benevolent agent providing coordinating signals? Theoretical work in adaptive dynamics suggests a positive answer, which we test in a laboratory experiment. In the well-known Chicken game, we observe time average play that is close to the asymmetric pure Nash equilibrium in some treatments, and in other treatments we observe collusive play. In a game resembling rock-paper-scissors or matching pennies, we observe time average play close to a correlated equilibrium that is more efficient than the unique Nash equilibrium. Estimates and simulations of adaptive dynamics capture much of the observed regularities.

Keywords: Correlated equilibrium; Laboratory experiment; Adaptive dynamics

JEL-codes: A00

34 pages, September 29, 2021

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