Let׳s talk it over: Coordination via preplay communication with level-k thinking
Published Web Locationhttp://econweb.ucsd.edu/~v2crawford/ExperimentsAndGameTheoryAnnualReview19Revised.pdf
This paper reconsiders Joseph Farrell׳s (1987) and Matthew Rabin׳s (1994) analyses of coordination via preplay communication, focusing on Farrell׳s analysis of Battle of the Sexes. Replacing their equilibrium and rationalizability assumptions with a structural non-equilibrium model based on level-k thinking, I reevaluate FR׳s assumptions on how players use language and their conclusions on the limits of communication in bringing about coordination. The analysis partly supports their assumptions about how players use language, but suggests that their “agreements” do not reflect a full meeting of the minds. A level-k analysis also yields very different conclusions about the effectiveness of communication.