Chapter 52 The Problem of Common Choice in Symmetric N-person Coordination Games

Publisher Summary Coordination problems are easily solved when there are clear and unambiguous signals. Institutional mechanisms that enhance the clarity of signals enables even cheap talk to work as a coordinating mechanism. On the other hand, learning about signals, especially if there is path-dependent noise in the environment, complicates the ability of subjects to settle on a common coordinating device. Coordination problems, such as the one facing our Cornhusker motorists, can be simply and easily solved provided an appropriate institutional remedy is at hand. Markets, for example, with frictionless transaction costs and complete information, constitute one way of quickly coordinating supply and demand. The evolution of social norms constitutes another way of coordinating human action. Central to both of these solutions is the presence of a clear, unambiguous signal about what actions individuals should take. Where such a signal is present, the problem of coordination is easily solved; where absent, the problem of coordination can be extraordinarily difficult.