Communication, Leadership and Coordination Failure

26 Pages Posted: 5 Sep 2015 Last revised: 6 Jan 2017

See all articles by Lu Dong

Lu Dong

University of Nottingham - School of Economics

Maria Montero

University of Nottingham - School of Economics

Alex Possajennikov

University of Nottingham - School of Economics

Date Written: September 3, 2015

Abstract

Using experimental methods, this paper investigates the limits of communication and leadership in aiding group coordination in a minimum effort game. Choosing the highest effort is the payoff dominant Nash equilibrium in this game, and communication and leadership are expected to help in coordinating on such an equilibrium. We consider an environment in which the benefits of coordination are low compared to the cost of mis-coordination. In this environment, players converge to the most inefficient equilibrium in the absence of a leader. We look at two types of leaders: a cheap-talk leader-communicator who suggests an effort level but is free to choose a different level from the one suggested, and a first-mover leader whose choice of effort is observed by the rest of the group. We study whether leadership can prevent coordination failure and whether leadership allows coordination on a higher effort after a history of coordination failure. We find that in this tough environment both types of leadership are insufficient to escape from the low-effort equilibrium but leadership has some (limited) ability to prevent coordination failure. With the help of the strategy method for the followers' responses we find that the main reason for the persistence of coordination failure in this environment is the presence of followers who do not follow (or would not have followed) the leader.

Keywords: minimum effort game, coordination failure, communication, leadership

JEL Classification: C72, C92, D23

Suggested Citation

Dong, Lu and Montero, Maria and Possajennikov, Alex, Communication, Leadership and Coordination Failure (September 3, 2015). Available at SSRN: https://ssrn.com/abstract=2655861 or http://dx.doi.org/10.2139/ssrn.2655861

Lu Dong

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

Maria Montero (Contact Author)

University of Nottingham - School of Economics ( email )

Centre for Decision Research & Experimental Econ.
University Park
Nottingham NG7 2RD
United Kingdom

Alex Possajennikov

University of Nottingham - School of Economics ( email )

University Park
Nottingham, NG7 2RD
United Kingdom

HOME PAGE: http://www.nottingham.ac.uk/~lezap/

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