Coordination Failures
A coordination failure occurs when a group remains in a worse outcome because changing alone would not benefit an individual. Reaching a better outcome may require shared expectations, commitments, or changes to incentives.
THE IDEA
In a coordination game, players benefit from choosing compatible strategies. These may be the same action, such as following one driving convention, or complementary actions. A mismatch can leave players worse off.
A Nash equilibrium is a set of strategies in which no player can improve their payoff by changing alone, given the others’ strategies. A game can have several equilibria, and an equilibrium need not be the best outcome for the group. People may stay with an unsatisfactory convention because a unilateral switch would be costly.
Changing that outcome requires attention to the incentives and expectations holding it in place. Agreement, a common standard, a credible commitment, or a change in payoffs can help. Some changes need close coordination, but unanimity and simultaneous action are not requirements of every coordination problem. Driving conventions, interview attire, and security policies illustrate different ways that other people’s choices constrain an individual’s options.
When to use it
International climate agreements: Coordinating commitments and addressing incentives to free-ride.
Technology standards (e.g., QWERTY keyboard layout, which persists despite potential better layouts).
Corporate culture (e.g., long working hours as a signal of commitment).
Public health (e.g., wearing masks during a pandemic, where compliance is higher if everyone does it).
FROM THEORY TO EVERYDAY LIFE
In practice
Driving Side Convention
In many countries, everyone drives on the right; in others, on the left. Once a convention is established, no individual has an incentive to switch unilaterally, even if the other convention might be slightly safer or more efficient. The cost of breaking the norm (accidents) is high.
Interview Attire Norm
In many industries, wearing a suit to a job interview is standard. An individual deviating risks being judged negatively, so most conform even if they'd prefer more casual dress. This norm persists despite no inherent superiority.
Nuclear Arms Race
In a simplified arms-race model, a country may maintain an arsenal because it fears the consequences of disarming alone. The stable outcome can involve costs and risks that coordinated commitments might reduce. Whether this is a coordination game or another kind of strategic dilemma depends on the assumed payoffs.
A MOMENT TO REFLECT
Put it to work.
Can you identify a coordination failure in your organization or community? What individual incentives maintain the status quo?
What would it take to coordinate a switch to a better equilibrium? Who would need to act and how?
When have you personally felt pressure to conform to a suboptimal norm because others were doing it?
CONTINUE THE CONVERSATION
Source texts
- The Great Mental Models Volume 4 Economics and Art