An Experimental Study on the Effect of Ambiguity in a Coordination Game

Paper number: 14/10

Paper date: 3rd June 2014

Year: 2014

Paper Category: Discussion Paper

Authors

David Kelsey and Sara le Roux

Abstract

We report an experimental test of the in‡uence of ambiguity on behaviour in a coordination game. We study the behaviour of subjects in the presence of ambiguity and attempt to determine whether they prefer to choose an ambiguity safe option. We …find that this strategy, which is not played in either Nash equilibrium or iterated dominance equilibrium, is indeed chosen quite frequently. This provides evidence that ambiguity aversion in‡uences behaviour in games. While the behaviour of the Row Player is consistent with randomising between her strategies, the Column Player shows a marked preference for avoiding ambiguity and choosing his ambiguity-safe strategy.

Keywords: Ambiguity; Choquet expected utility; coordination game; Ellsberg urn, experimental economics.

JEL Classi…cation: C72; C91; D03; D81

An Experimental Study on the Effect of Ambiguity in a Coordination Game An Experimental Study on the Effect of Ambiguity in a Coordination Game