Solving the Hi-lo Paradox: Equilibria, Beliefs, and Coordination

Abstract

Game theorists have tried for decades to explain how rational or quasi-rational individuals are able to coordinate in situations in which there is more than one way to satisfy their preferences. In this chapter I focus in particular on the formation of common beliefs that supposedly sustain coordination in Hi-lo games. I review some attempts to solve the problem, such as bounded rationality, team reasoning, and solution thinking. Following their lead, I suggest that successful coordination is belief-less coordination, and that simple means-ends rationality explains how coordination problems may be solved using techniques of minimal mindreading.