Coordination in the Network Minimum Game
We study organizational design and its role in coordination failure using the network minimum game: a version of the minimum-effort game where dependencies between players are captured by a directed network. We show, theoretically and experimentally, that acyclic networks are most conducive to successful coordination. Indeed, introducing a single link to complete a cycle of dependencies may destroy coordination. Further, acyclic networks make coordination resilient: initial coordination failure is often overcome after repeated play in acyclic networks, but not in cyclic networks. Our findings provide a novel perspective on the near-ubiquity of acyclic (e.g., hierarchical) structures in organizations.
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- Bandits in the Lab (John McMillan Prize for the Best Paper in Economics by a PhD Student)We experimentally implement a dynamic public-good problem, where the public good in question is the evolving information about agents’ common state of the world. Specifically, we test Keller, Rady, and Cripps (2005)’ game of strategic experimentation with exponential bandits in the laboratory. We find strong support for the prediction of free-riding because of strategic concerns. We also find strong evidence for behavior that is characteristic of Markov Perfect Equilibrium: non-cut-off behavior, lonely pioneers and frequent switches of action.
- Asset Ownership and the Hold-Up Problem We study a contract environment with an ex-ante investment stage and where ex-post bargaining takes place under one-sided asymmetric information. We offer a model where only the presence of an outside option allows for approximately ex-ante efficiency. Without an outside option, any static or sequential mechanism performs worse, which we view as a rationale for the role of ownership allocation in contracting environments with asymmetric information. We take these theoretical predictions to a laboratory setting and find that outside options as implemented through asset ownership are valuable, not because of efficient ex-ante investment but because they reduce ex-post frictions.