The power of sunspots: an experimental analysis
In an experiment using a coordination game with extrinsic random signals (“sunspots”), we systematically vary the stochastic process generating these signals and measure how signals affect behavior. We find that sunspot equilibria emerge naturally with salient public signals. However, highly correla...
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| Main Authors: | , , |
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| Format: | Article (Journal) |
| Language: | English |
| Published: |
2019
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| In: |
Journal of monetary economics
Year: 2018, Volume: 103, Pages: 123-136 |
| DOI: | 10.1016/j.jmoneco.2018.08.006 |
| Online Access: | Verlag, Volltext: https://doi.org/10.1016/j.jmoneco.2018.08.006 Verlag: http://www.sciencedirect.com/science/article/pii/S0304393218304896 
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| Author Notes: | Dietmar Fehr, Frank Heinemann, Aniol Llorente-Saguer |
| Summary: | In an experiment using a coordination game with extrinsic random signals (“sunspots”), we systematically vary the stochastic process generating these signals and measure how signals affect behavior. We find that sunspot equilibria emerge naturally with salient public signals. However, highly correlated private signals can also lead to sunspot-driven behavior, even when this is not an equilibrium. Private signals reduce the power of public signals as sunspot variables. The higher the correlation of extrinsic signals and the more easily they can be aggregated, the more powerful these signals are in distracting actions from the action that minimizes strategic uncertainty. |
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| Item Description: | Available online 23 August 2018 Gesehen am 15.10.2019 |
| Physical Description: | Online Resource |
| DOI: | 10.1016/j.jmoneco.2018.08.006 |