Convergence to Rational Expectations in a Stationary Linear Game
AbstractThis paper describes several learning processes which converge, with probability one, to the rational expectations (Bayesian-Nash) equilibrium of a stationary linear game. The learning processes include a test for convergence to equilibrium and a method for changing the parameters of the process when nonconvergence is indicated. This self-stabilization property eliminates the need to impose stability conditions on the economic environment. Convergence to equilibrium is proved for two types of self-stabilizing learning mechanisms: a centralized forecasting mechanism and a decentralized strategy adjustment process. Copyright 1992 by The Review of Economic Studies Limited.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Review of Economic Studies.
Volume (Year): 59 (1992)
Issue (Month): 1 (January)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0034-6527
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- Linn, Scott C. & Stanhouse, Bryan E., 1997. "The economic advantage of least squares learning in a risky asset market," Journal of Economics and Business, Elsevier, vol. 49(4), pages 303-319.
- Buchanan, Neil H., 2008. "How realistic is the supply/demand equilibrium story: A simple demonstration of false trading and its implications for market equilibrium," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 37(1), pages 400-415, February.
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