Why do diverse groups outperform homogeneous groups in some settings, but not in others? We show that while diverse groups experience more frictions than homogeneous ones, they are also less conformist. Homogeneous teams are optimal when it is critical to avoid miscoordination. However, when there are significant opportunities to implement new efficient practices, diverse groups perform better.
What type of interaction structure is most conducive to sustaining cooperation? How does this depend on the possibilities to monitor others’ behavior?
Natural language is often ambiguous; the same message can be interpreted in different ways by different people. Using a framework that distinguishes between the language in which statements are made and the interpretation of statements, we demonstrate that players may come to have different beliefs starting from a common prior, even if they have received exactly the same
information. So, the common-prior assumption is hard to justify in the presence of ambiguity.
It is well-known that game-theoretic predictions can be extremely sensitive to small perturbations in higher-order beliefs. If, however, outcomes are robust to a wider range of perturbations in a subclass of games, then we need to be less concerned with the potential sensitivity of predictions when that class of games models the strategic situation we are interested in. I identify a class of economically important games for which robust predictions can be obtained.