On the empirical relevance of correlated equilibrium

• Published in: Journal of economic theory Vol. 205; p. 105531
• Main Authors: Friedman, Daniel, Rabanal, Jean Paul, Rud, Olga A., Zhao, Shuchen
• Format: Journal Article
• Language: English
• Published: Elsevier Inc 01.10.2022
• Subjects: Adaptive dynamics; Correlated equilibrium; Laboratory experiment; Laboratory experiment; Adaptive dynamics; C92; Correlated equilibrium; C73; C72
• ISSN: 0022-0531; 1095-7235
• DOI: 10.1016/j.jet.2022.105531

•We investigate the possibility to achieve correlated equilibrium in the absence of external signals with shared experience.•Treatments include two types of games, two levels of information, and two types of regret in the adaptive dynamics.•In the Chicken game, we observe time average play that is close to the pure Nash equilibrium with more conducive treatments.•In the game from Moulin and Vial (1998), we observe time average play close to a correlated equilibrium.•Human subjects respond systematically to positive regret, but respond quite heterogeneously to negative regret. Absent coordinating signals from an exogenous benevolent agent, can an efficient correlated equilibrium emerge? Theoretical work in adaptive dynamics suggests a positive answer, which we test in a laboratory experiment. In the well-known Chicken game, we observe time average play that is close to the asymmetric pure Nash equilibrium in some treatments, and in other treatments we observe collusive play. In a game resembling rock-paper-scissors or matching pennies, we observe time average play close to a correlated equilibrium that is more efficient than the unique Nash equilibrium. Estimates and simulations of adaptive dynamics capture much of the observed heterogeneity across player pairs as well as dynamic regularities.