Discussion paper

DP16644 Coordination with Cognitive Noise

We experimentally study how cognitive noise affects behavior in coordination games. When players face small computational errors in valuation, equilibrium play becomes more predictable owing to the disappearance of multiple equilibria. Our experimental data provide novel evidence for this prediction: the frequency of coordination depends systematically on (i) public information and (ii) the distribution from which public information is drawn. We estimate that cognitive noise constitutes roughly half of the observed noise in strategic behavior. The errors that we model are distinct from those in previous behavioral game theory models and give rise to novel predictions that our data support.


Frydman, C and S Nunnari (2021), ‘DP16644 Coordination with Cognitive Noise‘, CEPR Discussion Paper No. 16644. CEPR Press, Paris & London. https://cepr.org/publications/dp16644