Way back in Chapter 1 I introduced the Coordination game. Remember how Sony and Toshiba had to decide whether to jointly adopt Blu-ray or HD DVD? While each player had its own preferred outcome, the key sticking point of the game was that failing to coordinate at all led to a mutually poor outcome.
Starting in the 1990s, experimental game theorists have put this kind of coordination conundrum to the test. How do people behave in these situations, at least in the laboratory?
A series of coordination experiments was based on the following matrix game, with a payoff structure very similar to the one we used in Chapters 1 and 4.
First, let’s see what theory predicts. Without going through the math here, it turns out ...