Discontinuous and Continuous Stochastic Choice and Coordination in the Lab
Time & Location
We introduce a novel experimental design to study the implications of different information structures for agents’ behaviour in the lab. Our design is based on a visual presentation of the density function, which allows us to circumvent the language of distributions and conditional probabilities when communicating with subjects. We show that a small variation in the design makes the stochastic choice rules that participants follow either continuous or discontinuous in the state. We apply the design to a coordination game of incomplete information. When choice rules are continuous, the average play of the experiment participants is close to the risk-dominant equilibrium, as predicted by the theory. When discontinuous choice rules are available, play tends to shift towards behaviour corresponding to the payoff-dominant equilibrium.