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Point beauty contest: measuring the distribution of focal points on the individual level

Schmidt, Robert J.

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Abstract

We propose the Point Beauty Contest, a mechanism to identify the distribution of focal points on the individual level. By contrast to conventional coordination, subjects coordinate by the distribution of points. This allows for nuanced coordination strategies, as subjects can invest in multiple alternatives at the same time and weigh their choice. A subject´s strategy choice then reveals her perception of the distribution of focal points. In an experiment on the elicitation of social norms, we compare the mechanism with conventional coordination. The data confirms the theoretical predictions regarding coordination behavior and demonstrates that the proposed technique is suited to identify the distribution of focal points on the individual level. Using Monte Carlo simulations, we find that the proposed mechanism identifies focal points on the population level more efficiently than conventional coordination. We point to the possibility of using the mechanism as a simple method to directly measure strategic uncertainty.

Item Type: Working paper
Series Name: Discussion Paper Series / University of Heidelberg, Department of Economics
Volume: 0667
Place of Publication: Heidelberg
Date Deposited: 27 Sep 2019 14:05
Date: September 2019
Number of Pages: 22
Faculties / Institutes: The Faculty of Economics and Social Studies > Alfred-Weber-Institut for Economics
Subjects: 330 Economics
Uncontrolled Keywords: coordination, focal points, games theory, strategic uncertainty, social norms
Schriftenreihe ID: Discussion Paper Series / University of Heidelberg, Department of Economics

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