Measuring the premium on common knowledge in computer-mediated coordination problems

Common knowledge, whereby everybody knows something, and everybody knows that everybody knows it, and so on ad infinitum, is claimed to be central to coordination in organizations. However, this claim has so far not received empirical support, as a method to empirically compare common knowledge with other forms of knowledge has not been available. In this article, we present a novel method through which we empirically estimate the common knowledge premium—the level of users’ preference of common knowledge over “knowledge by all” (where everybody knows something, but not necessarily everybody knows that everybody knows it). Using the method we show that a “premium” of common knowledge over “knowledge by all” does exist consistently, across populations and measuring variations. The findings provide empirical support for the centrality of common knowledge. Implications of the study are discussed.