Reducing Efficiency through Communication in Competitive Coordination Games*
Timothy N. Casona, Roman M. Sheremetab, and Jingjing Zhangc a Department of Economics, Krannert School of Management, Purdue University, 403 W. State St., West Lafayette, IN 47906-2056, U.S.A. b Argyros School of Business and Economics, Chapman University, One University Drive, Orange, CA 92866, U.S.A. c Department of Economics, McMaster University, 1280 Main Street West, Hamilton, ON L8S 4M4, Canada

July 30, 2009 Abstract
Costless pre-play communication has been found to effectively facilitate coordination and enhance efficiency by increasing individual payoffs in games with Pareto-ranked equilibria. We report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. Allowing group members to communicate before choosing efforts leads to more aggressive competition and greater coordination, but also results in substantially lower payoffs than a control treatment without communication. Our experiment thus provides evidence that communication can reduce efficiency in competitive coordination games. This contrasts sharply with experimental findings from public goods and other coordination games, where communication enhances efficiency and often leads to socially optimal outcomes.

JEL Classifications: C71, C72, C91, C92, D72, H41 Keywords: contest, between-group competition, within-group competition, cooperation, coordination, free-riding, experiments
Corresponding author: Roman M. Sheremeta; E-mail: rshereme@purdue.edu * We thank Jordi Brandts, Subhasish Chowdhury, David Cooper, Anya Savikhin, seminar participants at Purdue University and participants at the June 2009 Economic Science Association meeting for helpful discussions and comments. We retain responsibility for any errors. This research has been supported by National Science