Beyond Hawks and Doves: Can inequality ease coordination?

Abstract

AbstractIt is often argued that inequality may worsen coordination failures as it exacerbates conflicts of interests, making it difficult to achieve an efficient outcome. This paper shows that this needs not to be always the case. In a context in which two interacting populations have conflicting interests, we introduce ex-ante inequality, by making one population stronger than the other. This reduces the cost of miscoordination for the weakest population, and at the same time it makes some equilibria more equitable than others, thus more focal and attractive for inequality-averse players. Hence, both social preferences and strategic risk considerations may ease coordination. We provide experimental support for this hypothesis, by considering an extended two-population Hawk–Dove game, where ex-ante inequality, number of pure-strategy equilibria, and cost of coordination vary across treatments. We find that subjects coordinate more often on the efficient outcomes in the treatment with ex-ante inequality.