Compromise or Alternation? Experimental Evidence on Coordination Under Payoff Asymmetry

Area of Science:

• Behavioral Economics
• Game Theory
• Experimental Economics

Background:

• The compromise option is recognized as a coordination device in game theory.
• Limited understanding exists on how payoff asymmetry influences the adoption of compromise strategies.

Purpose of the Study:

• To experimentally investigate the impact of varying payoff asymmetry on coordination behavior.
• To analyze strategy adoption in a repeated battle-of-the-sexes game with a compromise option.

Main Methods:

• Utilized a repeated battle-of-the-sexes (BOS) game with a compromise option.
• Implemented three between-subjects treatments with differing levels of payoff asymmetry.
• Employed a hybrid matching protocol for experimental sessions.

Main Results:

• Increased payoff asymmetry led to higher coordination on the compromise option.
• Initial coordination rates decreased with higher asymmetry but improved with repeated interaction and learning.
• The alternation strategy proved more efficient than the compromise strategy, with both enhancing fairness.

Conclusions:

• Payoff asymmetry significantly influences strategy selection between compromise and alternation.
• Repeated interactions and learning can mitigate negative effects of payoff asymmetry on coordination.
• Both compromise and alternation strategies contribute to fairness in strategic interactions.