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How burning money requires a lot of rationality to be effective

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  • Seel, Christian
  • Wichardt, Philipp C.

Abstract

This paper proposes an extension of the valuation equilibrium concept (Jehiel and Samet, 2007), which partly endogenises the underlying grouping of actions. The effect on equilibrium predictions is illustrated in a burning money game.

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File URL: http://www.sciencedirect.com/science/article/pii/S016517651100509X
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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 115 (2012)
Issue (Month): 1 ()
Pages: 111-113

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Handle: RePEc:eee:ecolet:v:115:y:2012:i:1:p:111-113

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Bounded rationality; Burning money; Forward induction; Valuation equilibrium;

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  1. Huck, Steffen & Muller, Wieland, 2005. "Burning money and (pseudo) first-mover advantages: an experimental study on forward induction," Games and Economic Behavior, Elsevier, vol. 51(1), pages 109-127, April.
  2. Philippe Jehiel & Dov Samet, 2003. "Valuation Equilibria," Game Theory and Information 0310003, EconWPA.
  3. Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June.
  4. van Damme,Eric, 1987. "Stable equilibria and forward induction," Discussion Paper Serie A 128, University of Bonn, Germany.
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