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Is knowledge curse or blessing in pure coordination problems?

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Abstract

Does greater knowledge help or hinder one’s ability to coordinate with others? While individual expertise can reveal a suitable focal point to converge on, ‘blissful’ ignorance may systematically bias decisions towards it through mere recognition. Our experiment finds in favour of the former possibility. Both specific and general knowledge are significantly associated with success in four of five coordination problems as well as over all. Our analysis suggests that more knowledgeable participants are better able to identify focal decision alternatives because (1) they are aware of more such alternatives and (2) possess more relevant information about each.

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Notes

  1. Mehta et al. (1994, p. 666, 671) call these “one-ended questions”.

  2. Note that knowledge over imputation may instead be the product of rational Bayesian analysis to the extent that experts draw inferences about the knowledge of others from what they themselves know (see Dawes 1989). We thank the editor for pointing out this alternative account.

  3. The reason is that we wanted to test the effects of different individual knowledge rather than learning in the participant group as a whole. Matching of co-participants’ final answers introduces a confounding element of renewed second guessing that we wanted to avoid.

  4. Selected instructions are provided in the appendix.

  5. At the time of the experiment £1 Sterling traded at 1.65 US$.

  6. These correlations are robust to using only native British or non-British participants.

  7. Kolmogorov–Smirnov and Shapiro–Wilk tests for category coordination in each of the five categories have p ≤ 0.000.

  8. As explained, we used focal category as the dependent variable because of the bimodal distribution of category coordination. To assess whether these results are sensitive for our chosen approach we also performed ordinary least squares regressions for each of the categories with category coordination as the dependent variable. The results also confirm that category knowledge is significant at the 95% level or higher for every category but EUROPE.

  9. We use 20 as a conservative test, thereby excluding roughly one-third of observations. The same results apply for lower values such as 10 and 5. Higher values reduce the sample size too much for meaningful analysis.

  10. Our experiment was not designed to examine the particular considerations participants engage in when trying to coordinate.

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Author information

Authors and Affiliations

  1. Behavioural Business Lab, School of Economics, Finance and Marketing, RMIT University, 445 Swanston Street Melbourne, Victoria, 3000, Australia

    Swee-Hoon Chuah & Robert Hoffmann

  2. Nottingham University Business School, Jubilee Campus, Wollaton Road, Nottingham, NG8 1BB, UK

    Jeremy Larner

Authors
  1. Swee-Hoon Chuah
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  2. Robert Hoffmann
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  3. Jeremy Larner
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Correspondence to Robert Hoffmann.

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Appendix: Experimental instructions

Appendix: Experimental instructions

  • Coordination question

    • Name one [category]. Your objective is to give the same answer as your co- participant. If this is the category randomly chosen for payment, you will earn

    • £10 if your answer is the same as your co-participant’s. You are free to choose any valid item of the category as your answer for each question. However, if you do not give an answer or if you give more than one answer or if your answer is invalid or incorrect or unclear, you will not earn any money for the question.

  • Information Question

    • You will now be asked to provide all the possible correct answers to the 5 categories. One of the categories will be chosen at random for payment. For that chosen category, you will earn £0.50 for each correct answer you provide. To be correct, your answer must be valid (a valid member of that category) and clear (not ambiguous). For each wrong answer you provide, you will lose

    • £0.50. The lowest you can earn for each category is £0 (i.e., you will not face negative earnings). To maximise your earnings, you should provide as many correct answers as you can. For example, say the chosen category was London Airports, and you provide the following answers: Heathrow, Stansted, Gatwick, Luton and East Midlands. You will receive £2 for 4 correct answers (£0.50 ×4). East Midlands is a wrong answer and you will lose £0.50 for this 1 wrong answer. So your total earnings for this category will be £1.50.You may answer in any order you wish, but you must finish within 15 min, after which this document will be collected from you.

  • Strategy change question

    • Now that you have seen the complete list of correct answers for each of the 5 categories, we want to give you this opportunity to change your answers. For each question below, please now indicate if you would like to change your an- swer. If so, please write down your new answer. Your new answer will be used instead of your original answer to be matched against your co-participant’s original answer.

  • Academic performance question

    • In which degree class is your current average across all modules taken so far at University (first class, second class (upper), second class (lower), third class or pass)?

  • General knowledge question

    • Say you were to participate in a general knowledge quiz competition. When compared to the other participants in this experiment, how well do you think you would perform in such a quiz, on a scale of 1–10 (with 10 being well-above average performance)?

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Chuah, SH., Hoffmann, R. & Larner, J. Is knowledge curse or blessing in pure coordination problems?. Theory Decis 87, 123–146 (2019). https://doi.org/10.1007/s11238-019-09692-w

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