Econometrica: May, 1990, Volume 58, Issue 3

Learning How to Cooperate: Optimal Play in Repeated Coordination Games

https://doi.org/0012-9682(199005)58:3<571:LHTCOP>2.0.CO;2-T
p. 571-595

Hans Haller, Vincent P. Crawford

This paper proposes a characterization of optimal strategies for playing certain repeated coordination games whose players have identical preferences. Players' optimal coordination strategies reflect their uncertainty about how their partners will respond to multiple-equilibrium problems; this uncertainty constraints the statistical relationships between their strategy choices players can bring about. We show that optimality is nevertheless consistent with subgame-perfect equilibrium. Examples are analyzed in which players use precedents as focal points to achieve and maintain coordination, and in which they play dominated strategies with positive probability in early stages in the hope of generating a useful precedent.