Time horizon and equilibrium selection in tacit coordination games: Experimental results

We analyze the impact of the number of repetitions of a simple coordination game on equilibrium selection. Results of computerized coordination experiments with varying number of iterations show that the Pareto dominant equilibrium is selected already after a few periods when the number of iterations is sufficiently large. Our results can be partly explained by a particular version of the 'learning direction theory'. Furthermore, we present a new framework for experimental design in real time. (C) 1998 Elsevier Science B.V. All rights reserved.