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Convergence to Rational Expectations in a Stationary Linear Game

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  • Jordan, J S
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    Abstract

    This 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 Info

    Article provided by Wiley Blackwell in its journal Review of Economic Studies.

    Volume (Year): 59 (1992)
    Issue (Month): 1 (January)
    Pages: 109-23

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    Handle: RePEc:bla:restud:v:59:y:1992:i:1:p:109-23

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    Cited by:
    1. 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.
    2. 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.
    3. Marimon, R. & McGraltan, E., 1993. "On Adaptative Learning in Strategic Games," Papers 190, Cambridge - Risk, Information & Quantity Signals.
    4. Vives, Xavier, 1997. "Learning from Others: A Welfare Analysis," Games and Economic Behavior, Elsevier, vol. 20(2), pages 177-200, August.

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