Common knowledge, coordination, and strategic mentalizing in human social life.

ABSTRACT

People often coordinate for mutual gain, such as keeping to opposite sides of a stairway, dubbing an object or place with a name, or assembling en masse to protest a regime. Because successful coordination requires complementary choices, these opportunities raise the puzzle of how people attain the common knowledge that facilitates coordination, in which a person knows X, knows that the other knows X, knows that the other knows that he knows, ad infinitum. We show that people are highly sensitive to the distinction between common knowledge and mere private or shared knowledge, and that they deploy this distinction strategically in diverse social situations that have the structure of coordination games, including market cooperation, innuendo, bystander intervention, attributions of charitability, self-conscious emotions, and moral condemnation.