General Issue in Coordination

Published by Mario Oettler on

Let’s consider the following game. It is a typical “battle of the sexes” game.

Payoff matrix for a coordination game

We have two Nash equilibria {Opera; Opera} and {Boxing; Boxing}. The question is now, how do those two players meet? If there is no communication possible, this task is difficult to achieve. They risk ending up in a situation where one player goes to the opera and the other one to boxing, which would yield zero rewards.

Possible Solutions to Coordination Failure

There are many scenarios for coordination failure and ways to solve the coordination problem.

We will discuss the following ones in more detail.

  • Communication
  • Payment dominance
  • Risk dominance
  • Experience
  • Schelling Point/ Focus Point
  • Outside Option
  • Laws, rules, and conventions
  • Mixed Strategies
  • Correlated Strategies
  • Prices