Abstract
Strategic uncertainty complicates policy design in coordination games. To rein in strategic uncertainty, the planner in this paper connects the problem of policy design
to that of equilibrium selection. We characterize the subsidy scheme that induces coordination on a given outcome of the game as its unique equilibrium. Optimal
subsidies are unique, symmetric for identical players, continuous functions of model parameters, and do not make the targeted strategies strictly dominant for any one player; these properties differ starkly from canonical results in the literature. Uncertainty about payoffs impels policy moderation as overly aggressive intervention might itself induce coordination failure.
The seminar will be held in room 1249 (12th floor) at Eilert Sundts Hus. The address is Moltke Moes vei 31.