Tacit Coordination Research Articles

Corporate Disclosure as a Tacit Coordination Mechanism: Evidence from Cartel Enforcement Regulations

ABSTRACTWe empirically study how collusion in product markets affects firms' financial disclosure strategies. We find that after a rise in cartel enforcement, U.S. firms start sharing more detailed information in their financial disclosure about their customers, contracts, and products. This new information potentially benefits peers by helping to tacitly coordinate actions in product markets. Indeed, changes in disclosure are associated with higher future profitability. Our results highlight the potential conflict between securities and antitrust regulations.

Individual strategic profiles in tacit coordination games

ABSTRACT In tacit coordination games people manage to converge on prominent solutions, which are known as focal points. There is still no accepted explanation of how players manage to converge on the same solution. It could be that the limited explanatory power arises from the fact that existing theories rely on pure strategies to describe behaviour. The aim of the current study is to construct a cognitive model that more accurately describes human behaviour in tacit coordination games. To this end we constructed individual strategic profiles that take into account the subjective preferences of individual players regarding the prominent selection rules. Subsequently, the individual profiles were clustered to gain insights regarding different types of coordinators. By using machine learning and statistical methods we were able to demonstrate, for the first time, the relationship between different types of strategic profiles and coordination ability. The results of this study demonstrate the importance of constructing a descriptive behavioural model that may potentially improve prediction of human decision-making in the context of human-machine interaction.

Collectivism-individualism: Strategic behavior in tacit coordination games.

The effect of culture on strategic interaction has been widely explored. However, the effect of the cultural background on focal point selection in tacit coordination games has not yet been examined. To accomplish this goal, in this study we have focused on the individual level of analysis. That is, we constructed a strategic profile to model the behavior of each individual player and then used unsupervised learning methods on the individual data points. We have chosen to examine two groups of participants, Israelis (ICB) and Chinese (CCB), each belonging to a different cultural background representing individualist and collectivist societies, respectively. Clustering the individual strategic profiles has allowed us to gain further insights regarding the differences between the behavioral strategies of each cultural group. The results of this study demonstrate that the cultural background has a profound effect on the strategic profile and on the ability to succeed in tacit coordination games. Moreover, the current study emphasizes the importance of relying on the individual level of analysis and not only on the group level of analysis. The implications of these results and potential future studies are discussed.

Group behaviour in tacit coordination games with focal points – an experimental investigation

This paper reports an experimental investigation of Schelling's theory of focal points that compares group and individual behaviour. We find that, when players' interests are perfectly aligned, groups more often choose the salient option and achieve higher coordination success than individuals. However, in games with conflicts of interest, groups do not always perform better than individuals, especially when the degree of conflict is substantial. We also find that groups outperform individuals when identifying the solution to the coordination problem requires some level of cognitive sophistication. Finally, players that successfully identify the solution to this game also achieve greater coordination rates than other players in games with a low degree of conflict. This result raises the question of whether finding the focal point is more a matter of logic rather than imagination as Schelling argued.

You watch my back, I'll watch yours: Emergence of collective risk monitoring through tacit coordination in human social foraging

Abstract Predation risk is a significant concern when social animals including humans engage in foraging. When people search for resources together, individuals often find themselves in a producer–scrounger game, in which some individuals bear the cost of risk monitoring while others can free ride on those efforts. A theoretically rational strategy is to mix foraging and risk monitoring randomly with the same probability across all members, but such uncoordinated action often yields inefficiencies of under- or over-supply of risk monitoring in a group. Here, we examined whether people could spontaneously develop a coordinated risk-monitoring system, alternating vigilance and foraging in a pair. Given that human cooperation is vulnerable to fear of exploitation and emotional arousal under risk, we hypothesized that such sources of anxiety would be potential disruptors to coordination. In a laboratory experiment, two participants worked on a “treasure hunt” task simultaneously, in which they chose between low or high vigilance against predators during foraging without verbal communication. If one chose high vigilance with personal cost, it yielded a spillover benefit to the other. Besides behavioral choices, each participant's physiological arousal (skin conductance response) and cognitive effort (tonic pupil dilation) were measured during the task. Results showed that some pairs were actually able to develop a role-alternating system over time through tacit coordination, but coordinated action was also vulnerable to anxiety and mistrust among participants. Overall, these results imply that, besides the mutual behavioral control that often characterizes repeated interaction, cognitive control of emotional arousal may be a critical psychological factor for the emergence of coordinated cooperation.

Information Provision, Voter Coordination, and Electoral Accountability: Evidence from Mexican Social Networks

How do social networks moderate the way political information influences electoral accountability? We propose a simple model in which incumbent malfeasance revelations can facilitate coordination around less malfeasant challenger parties in highly connected voter networks, even when voters update favorably about incumbent party malfeasance. We provide evidence from Mexico of this mechanism by leveraging a field experiment in a context where the provision of incumbent malfeasance information increased support for incumbent parties, despite voters continuing to believe that challengers were less malfeasant than incumbents. Combining this experiment with detailed family network data, we show that—consistent with the model—the increase in incumbent party vote share due to information provision was counteracted by coordination around less malfeasant challengers in precincts with greater network connectedness. Individual-level data further demonstrate that networks facilitated explicit and tacit coordination among voters. These findings suggest that networks can help voters coordinate around information to help remove poorly performing politicians.

The Impact of Cognitive Style Diversity on Implicit Learning in Teams.

Organizations are increasingly looking for ways to reap the benefits of cognitive diversity for problem solving. A major unanswered question concerns the implications of cognitive diversity for longer-term outcomes such as team learning, with its broader effects on organizational learning and productivity. We study how cognitive style diversity in teams—or diversity in the way that team members encode, organize and process information—indirectly influences team learning through collective intelligence, or the general ability of a team to work together across a wide array of tasks. Synthesizing several perspectives, we predict and find that cognitive style diversity has a curvilinear—inverted U-shaped—relationship with collective intelligence. Collective intelligence is further positively related to the rate at which teams learn, and is a mechanism guiding the indirect relationship between cognitive style diversity and team learning. We test the predictions in 98 teams using ten rounds of the minimum-effort tacit coordination game. Overall, this research advances our understanding of the implications of cognitive diversity for organizations and why some teams demonstrate high levels of team learning in dynamic situations while others do not.

Learning Towards Transportation Network Equilibrium: A Model Comparison Study

As an interdisciplinary topic, human travel-choice behavior has attracted the interests of transportation managers, theoretical computer science researchers and economists. Recent studies on tacit coordination in iterated route choice games (i.e., a large number of subjects could achieve the transportation network equilibrium in limited rounds) have been driven by two questions. (1) Will learning behavior promote tacit coordination in route choice games? (2) Which learning model can best account for these choices/behaviors? To answer the first question, we choose a set of learning models and conduct extensive simulations to determine their success in accounting for major behavioral patterns. To answer the second question, we compare these models to one another by competitively testing their predictions on four different datasets. Although all the selected models account reasonably well for the slow convergence of the mean route choice to equilibrium, they account only moderately well for the mean frequencies of the round-to-round switches from one route to another and fail to appropriately account for substantial individual differences. The implications of these findings for model construction and testing are briefly discussed.

Artificial Intelligence and Collusion

The debate over whether, in the absence of overt communications, mere tacit coordination between competitors should be outlawed is neither new nor settled. Current technological developments in the field of artificial intelligence (AI) have added further complexity to the discussion, which has given rise to many works that explore the effects of the use of AI-powered pricing software on competition. This paper attempts to contribute to the debate by addressing some issues not covered in previous works. First, there are risks to consumer welfare associated with AI pricing software’s capacity to solve uncertainty (for example, supra-competitive equilibria may not be disrupted by changes in demand). Second, the use of artificial neural networks can make detection of anticompetitive pricing patterns more difficult. On the other hand, if authorities can harness the power of the technology themselves, detection problems could be alleviated. Third, the black box argument may not be a problem in this application of artificial neural networks since the pricing software industry has been able to develop more transparent algorithms in response to market demands. Finally, the use of AI pricing software brings some changes to the debate on the feasibility of remedies to mere interdependence, although more work needs to be carried out in this area.

When team member familiarity affects transactive memory and skills: a simulation-based training among police teams

The goal of this study was to evaluate the impact of team member familiarity on both technical and non-technical skills of police officers and to examine the mediating role of transactive memory components (specialization, coordination and credibility). Student police officers (N = 150) carried out professional simulation sessions in groups of three, with either familiar (n = 22 teams) or unfamiliar (n = 28 teams) team members, followed by a skills evaluation exercise. Professional instructors evaluated skills through direct observation of team member behaviours. The results revealed that training in familiar teams improved police officers’ technical and non-technical skills and transactive memory system. The effect of team familiarity on skills was mediated by transactive memory and specifically by the tacit coordination component. The findings are discussed in relation to the literature on the effects of team member familiarity on team performance, and implications for team training and staffing (turnover of personnel) in actions teams.Practitioner Summary: This study examined the effect of team member familiarity on both the technical and non-technical skills of police officers. Training in familiar teams improved skills and transactive memory. The positive effect of team member familiarity on skills was mediated by the coordination facet of transactive memory.

Why factors facilitating collusion may not predict cartel occurrence - experimental evidence

Factors facilitating collusion may not successfully predict cartel occurrence: When a factor predicts that collusion (explicit and tacit) becomes easier, firms might be less inclined to set up a cartel simply because tacit coordination already tends to go in hand with supra-competitive profits. We illustrate this issue with laboratory data. We run n-firm Cournot experiments with written cheap-talk communication between players and we compare them to treatments without the possibility to talk. We conduct this comparison for two, four, and six firms. We find that two firms indeed find it easier to collude tacitly but that the number of firms does not significantly affect outcomes with communication. As a result, the payoff gain from communication increases with the number of firms, at a decreasing rate.

Accounting for tacit coordination: The passing of accounts and the broader case for accounting theory

Tacit coordination is a pervasive aspect of accounting practice. This paper teases out insights on tacit coordination from existing scholarship, starting with studies of everyday life accounting, then turning to professional practice. It develops an understanding that, in the application of rules and accounting standards, in producing, framing, auditing and using statements, records, apologies or excuses, accounting practitioners tacitly coordinate towards the passing of accounts. This passing can be articulated in terms of structures, agencies and processes of tacit coordination involved in making accounting happen. The implications of this understanding of accounting practice and the importance of the wider domain of enquiry it is indicating are discussed with respect to the stewardship position of accounting professionals and the further development of accounting theory. The passing of accounts charges accounting practitioners with the stewardship of silence and indicates a broader case for accounting theory to address the full continuum of accounting practices. One vital role of such theory is to offer antidotes against the idea that any account, any slice of information, or any amount of ‘big data’, could speak for itself – or that it should.

Spatial externalities and risk in interdependent security games

Individuals regularly invest in self-protection to reduce the risk of an adverse event. The effectiveness of self-protection often depends on the actions of other economic agents and can be modeled as a stochastic coordination game with multiple Pareto-ranked equilibria. We use lab experiments to analyze tacit coordination in stochastic games with two kinds of interdependencies in payoffs: “non-spatial” in which every agent’s action has an impact on the risk faced by every other agent, and “spatial” in which agents only impact the risk faced by their immediate neighbors. We also compare behavior in the stochastic games to deterministic versions of the same games. We find that coordination on the payoff-dominant equilibrium is significantly easier in the deterministic games than in the stochastic games and that spatial interdependencies lead to greater levels of coordination in the deterministic game but not in the stochastic game. The difficulty with coordination observed in the stochastic games has important implications for many real-world examples of interdependent security and also illustrates the importance of not relying on data from deterministic experiments to analyze behavior in settings with risk.

The Limits of Sanctions as Instrument for Interest Actualisation in the International System: The Case of North Korea’s Nuclear Weapons Development

<p><em>This paper interrogates the potency of sanctions as US and UN instrument for de</em><em> </em><em>nuclearising DPRK and the intervening variables thereof. With the aid of secondary methods of data gathering, content analysis, and rational action theory as framework of analysis, the paper </em><em>observes</em><em> </em><em>that sanctions failed to actualize US and UN goals in denuclearising DPRK. It further observes that this failure is attributed to the absence of most of sanctions enhancing factors in the international system such as weak economy and political instability, quick imposition with decisive maximal impact, and active participation in liberalized trade, tacit coordination of enforcement, of sanctions with manifest political appetite to enforce penalties, lack of capacity to circumvent sanctions,</em><em> </em><em>avoiding an overuse of sanctions, weak offshore capital,</em><em> </em><em>and immobility of target assets. </em><em>Therefore, this paper recommends</em><em> </em><em>objective international engagement and integration of DPRK as a nuclear state.</em></p>

Coordination and Communication Challenges in Global Group Audits

SUMMARY Inspectors frequently identify deficiencies on global group audits (GGAs) attributed to problems in coordination and communication among the multiple participating firms. As GGAs involve large multinational entities with extensive global reach, the costs of audit failure are high. Prior research and theory suggest that coordination and communication challenges are common when interdependent teams perform work in complex environments. Studying actual experiences of 147 group audit leaders, we find that clients' size/regulatory status and global structure contribute to coordination/communication challenges, but language/cultural barriers are less important. We also investigate strategies that group auditors can use to mitigate challenges, finding that modularization (advance scripting of work) and ongoing communication (availability/use of communication channels) are not as effective as tacit coordination (leveraging common ground through knowledge/experience). The variation in knowledge of component teams reported by participants leads to the question of whether group auditors can influence the training and/or selection of component personnel.

日常的な相互行為における期待の暗黙の調整：:E. Goffmanのフォーマライゼーション

日常的な相互行為における期待の暗黙の調整：:E. Goffmanのフォーマライゼーション

Social Fluency: Easy Coordination Promotes Positive Impressions and Trust

Positive expectations are at the core of many relational assets, including positive reputation, trust, and cooperative norms. Past research has shown that achieving tacit coordination can create su...

Antitrust for Institutional Investors

With the increasing concentration of shares in the hands of large institutional investors, combined with greater involvement in corporate governance, the antitrust risk of common ownership has moved to center stage. Through an excess of enthusiasm, portfolio managers could end up exposing their firms and the portfolio companies to huge antitrust liability. In this Article, we start from basic antitrust principles to sketch out an antitrust compliance program for institutional investors and for the investor relations groups in portfolio companies. In doing so, we address the fundamental antitrust issues (explicit and tacit coordination) raised by the presence of common ownership by large, diversified investors. We then turn to more speculative concerns that have garnered a great deal of attention and that, to our eyes, threaten to divert attention from the core antitrust issues. We critically examine the claims of this newer literature, as illustrated by Azar, Schmaltz and Tecu (2017), that existing ownership patterns in the airline industry results in substantially higher prices. We then turn to the argument in Elhauge (2016) that existing ownership patterns violate Section 7 of the Clayton Act. Finally, we find the policy recommendations of Posner, Scott Morton, and Weyl (2017) to limit the ownership shares of multiple firms in oligopolistic industries to be overly stringent. To limit the chilling effect of antitrust on the valuable role of institutional investors in corporate governance, we propose a quasi “safe harbor” that protects investors from antitrust liability when their ownership share is less than 15 percent, the investors have no board representation, and they only engage in “normal” corporate governance activities.

Groups outperform individuals in tacit coordination by using consensual and disjunctive salience

Tacit coordination between individuals has received considerable research attention (Mehta, Starmer, & Sugden, 1994; Abele & Stasser, 2008). However, groups often must coordinate tacitly with other groups, and such intergroup coordination has been rarely studied. In three experiments, we found that interacting groups are more successful at coordinating tacitly than are individuals. This advantage is driven by two types of coordination salience that are uniquely derived from groups deliberating and making collective responses. Consensual salience occurs when groups select a response because a majority of members support it. Majorities efficiently identify popular response tendencies (i.e., focal points) and thereby increase the chances of matching other groups’ responses. Disjunctive salience occurs when at least one member of a group suggests a focal point. We propose that focal points are often demonstratively evident when mentioned, and if proposed by any group member, are likely to be adopted as the group response.

Autonocoin: A Proof-of-Belief Cryptocurrency

This paper proposes a self-governing cryptocurrency, dubbed Autonocoin. Cryptocurrency owners play formal tacit coordination games by making investments recorded on the blockchain. Such investments represent bets about the focal point resolution of normative issues, such as whether a proposed change to Autonocoin should occur. The game produces a result that resolves the issue. With a typical cryptocurrency, the client software establishes conventions that ultimately lead to the identification of the authoritative blockchain. Autonocoin completes a circle by making transactions on the blockchain that in turn define those conventions and the expected software behavior. The distributed consensus mechanism embodied by formal tacit coordination games, meanwhile, can make other types of decisions, including which of competing blockchains is authoritative and whether new Autonocoins should be rewarded to benefit those who have taken actions to benefit Autonocoin. This establishes a unique funding model for a cryptocurrency, and it addresses objections to cryptocurrencies issued predominantly to the initial founders, as well as to those that encourage wasteful mining activities.