Learning Coordination Through New Actions

Abstract

In this paper, we provide a novel approach to achieving a desired outcome in a coordination game: the original 2 x 2 game is embedded in a 2 x 3 game where one of the players may use a third action. For a large set of payoff values, only one of the Nash equilibria of the original 2 x 2 game is stable under replicator dynamics. We show that this Nash equilibrium attracts all initial conditions in the interior of the state space for the modified 2 x 3 game. Thus, the existence of a third action for one of the players, although not used, allows both players to coordinate on one Nash equilibrium. This Nash equilibrium is the one preferred by, at least, the player with access to the new action. This approach deals with both coordination failure (players choose the payoff-dominant Nash equilibrium, if such a Nash equilibrium exists) and miscoordination (players do not use mixed strategies).