Mechanism Design And Intervention In Coordination Games: Theoretical And Experimental Studie

From the two perspectives of theoretical analysis and laboratory experiment,this paper starts with the key variables that affect strategic uncertainty,and attempts to study the coordination problem from the inside to the outside of the organization.This paper consists of three topics.The first two topics design a mechanism for different coordination games respectively,and test the effectiveness of the mechanism for improving coordination efficiency theoretically and experimentally.The third topic focuses on the background uncertainty,which is strategically irrelevant to the game.We study the impact of the interaction between external systemic risk 和 strategic uncertainty on individual coordination beliefs and results.It also includes two parts:theoretical analysis and laboratory experiment results.In the first topic,we study coordination problem in a stag hunt game with multiple players,which has been recognized as a fundamental issue in behavioral game theories.Production activities within large organizations with multiple departments are often trapped in inefficiencies due to the nature of effort complementarity.The existing literature usually treats all individuals as a whole collaborative group,and pays group members only one-time for organizational output.In this topic,we innovatively propose a two-step payment mechanism,which refines the organization structure from a large group to smaller units of teams.The fact that there are many small teams subtly transforms the payment structure,and at the same time pays individuals both the ingroup coordination for the intermediate products within the teams and between-group coordination for the final products independently.In laboratory experiments,we set up two treatments to test the effect of the two-step payment mechanism.Subjects in the main treatment with the mechanistic intervention also make only one decision,but it includes both in-group and between-group payments,compared with one payment in the baseline treatment as the control group.The experimental data confirm the theoretical prediction: the two-step payment mechanism has a significant effect on improving the coordination failure,and the proportion of individuals who choose to make efforts in the group with mechanism intervention is significantly higher than that in the control group.The coordination success rate in the baseline treatment is only 8%,while the coordination success rate in the main treatment basically stable at 41.7%.The two-step payment mechanism changes the payment structure,and the change of the payment structure depends on the subdivision of the organizational structure.This refined double-payment structure reduces individual risk of exerting high efforts by simultaneously reducing the size of the team and increasing financial incentive,which not only increases the willingness of individuals to make efforts,but also increases people’s expectations for the efforts of other team members.This mechanism reduces strategic uncertainty,thereby improving coordination outcomes.It is worth noting that since the two-step payment system simultaneously reduces the size of the organization and increases the payment for intermediate goods,although theoretically only refining the organizational structure does not change the strategic uncertainty faced by the players,the description of dividing a large group to small groups may create the illusion of reduced strategic uncertainty to subjects.Therefore,in order to further test the robustness of the two-step payment mechanism,we conduct an additional treatment.There still exists division of large groups in the additional treatment,but the payment structure is consistent with the baseline treatment.The experimental data show that the additional treatment is not significantly different from the baseline treatment in terms of group-level coordination results as well as individuallevel coordination choices,but significantly worse than the main treatment with the two-step payment mechanism intervention.This shows that in the two-step payment mechanism reducing the size of the organization and splitting the payoffs are inseparable.Only simply reducing the group size cannot reduce the risk of making effort,and thus cannot improve coordination efficiency.In the second topic,we also study the coordination problem in the battle of the sexes game with multiple players,which is another classic binary-choice game in behavioral game theories.Different from the stag hunt game studied in the first topic,the conflict of interests between the two players often makes it difficult to achieve Nash equilibrium.According to the benefit characteristics of players in the battle of the sexes game,combined with the studies of focal point in the existing literature,we innovatively adopt the method of grouping players with the same interest preference and letting the groups make decisions successively to improve coordination efficiency.Note that we do not disclose the choice of the first decision-making group under conditions of successive actions,so theoretically there does not exist any difference from the simultaneous games.However,with the above intervention,we suspect that the preferred option of the first decision-making group will become the focal point of the whole group,thereby helping all player to achieve a tacit coordination.The experimental results confirm our conjecture: the average coordination success rate of the intervention group is 50.8%,which is significantly higher than that of the nonintervention control group,which is only 9.2%.There are two necessary conditions for using focal point intervention to improve the success rate of coordination: one is that individuals with the same interest preference must be divided into one group;the other is that each group should make decisions sequentially.The former groups many players according to the same interest characteristics,laying the groundwork for highlighting a focal option;the latter tries to highlight the preference option of the first decision-making group by changing the chronological order of each group’s decision-making.The above two conditions are indispensable for the creation and function of the focal point.We set up an additional treatment to verify the logic of focal point formation.In this treatment,players are still divided into groups and each group is given an order of decision-making.The critical point is that we change the grouping method.It is no longer grouped according to the same interest characteristics,while the group members have inconsistent interest preference.The experimental results find that the average coordination success rate of the additional treatment is 10%,which is not significantly different from the 9.2% of the baseline treatment,but is significantly lower than that of the main treatment with focal intervention,which shows that the correct grouping way and sequential decision-making are indispensable for improving coordination efficiency by creating focal point.Due to the existence of conflicts of interest in the game,the effect of focal point is often greatly weakened,and the current literature discussing focal point basically limits to two-player game.This topic shows that even for a multiplayer game,in which the difficulty of coordination is increased,it is still possible to achieve coordination success by creating potential focal point in an appropriate way.This also broadens future research on the effect and influencing factors of focal point under multiplayer games.The above two topics both aim at solving the strategic uncertainty within the coordination economic system through mechanism design,so as to improve coordination efficiency and social welfare level.However,in the complex and highly interconnect economic system,the strategic uncertainty of a single organizational system is usually affected by some factors outside the system.Since the equilibrium choice of coordination games is theoretically not affected by external systemic risks such as risk and ambiguity,which leads to the reduction of overall returns,it has received little attention in this field.The third topic of this paper focuses on the external risks of the coordination system,aiming to study the factors affecting strategic uncertainty from the perspective of the overall economic system.In the third topic,we note that related research on coordination games is often explored in the context of certain payoffs,where the behavior of individuals is only influenced by strategic uncertainty from other players.This topic focus on the external factors of the system,and studies whether the optimal coordination input of individuals will be affected if there is uncertainty in the economic background,that is,when there is uncertainty in fixed income that is strategically irrelevant.We first observe through laboratory experiments that the uncertainty of the economic background does generally reduce the level of people’s coordination input.The average minimum effort of the main treatment with background uncertainty is 3.11,which is lower than the control treatment’s 4.88.In order to further explore the role of economic background uncertainty in reducing individual coordination behaviors,we do an additional experiment,which directly starts with strategic uncertainty,that is,individuals’ belief levels about other people’s coordinated behaviors.Specifically,we add a step to the first experiment: after making coordination decisions,participants are asked to state their belief level about the value of their opponents’ inputs.The experimental results show that,compared with the control group without economic background uncertainty,the subjects in the intervention group with background uncertainty have significantly lower belief levels about other people’s coordination inputs.Meanwhile such a belief plays an important role in individual’s coordination choice.Thus,the second experiment basically explains the experimental results of the first experiment,that economic background uncertainty reduces coordination behavior and outcomes by amplifying people’s perceptions of strategic uncertainty about the coordination choices of other players.