Paper by Jasmina Arifovic†, Cars Hommes, Anita Kopányi-Peuker and Isabelle Salle in AER: Microeconomics
The article 'Ten Isn't Large! Group Size and Coordination in a Large-Scale Experiment' has appeared in the American Economic Review: Microeconomics.
The article provides experimental evidence on coordination within large groups that could proxy the atomistic nature of real-world markets. A bank run game was used where the two pure-strategy equilibria can be ranked by payoff and risk dominance and a sequence of public announcements introduces stochastic sunspot equilibria. The authors find systematic group size effects that theory fails to predict. When the payoff-dominant strategy is risky enough, the behavior of small groups is uninformative of the behavior in large groups: unlike smaller groups of size ten, larger groups exclusively coordinate on the Pareto-inferior strategy and never coordinate on sunspots.
About the authors: Cars Hommes and Isabelle Salle are TI research fellows. Anita Kopányi-Peuker is an alumna of Tinbergen Institute and is currently assistant professor at Radboud University. Jasmina Arifovic was a regular visitor of the CeNDEF group at ASE-UvA and sadly passed away a year ago before the article was published.
Arifovic, Jasmina, Cars Hommes, Anita Kopányi-Peuker, and Isabelle Salle. 2023. "Ten Isn't Large! Group Size and Coordination in a Large-Scale Experiment." American Economic Journal: Microeconomics, 15 (1): 580-617.DOI: 10.1257/mic.20200290