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Nash equilibrium when players account for the complexity of their forecasts

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  • Eliaz, Kfir

Abstract

Nash equilibrium is often interpreted as a steady state in which each player holds the correct expectations about the other players` behavior and acts rationally. This paper investigates the robustness of this interpretation when players` preferences are affected by their forecasts about the other players. In particular, I analyze the case of lexicographic preferences in which the simplicity of forecasts is secondary to material payoffs.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 44 (2003)
Issue (Month): 2 (August)
Pages: 286-310

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Handle: RePEc:eee:gamebe:v:44:y:2003:i:2:p:286-310

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Web page: http://www.elsevier.com/locate/inca/622836

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  1. Piccione, Michele, 1992. "Finite automata equilibria with discounting," Journal of Economic Theory, Elsevier, vol. 56(1), pages 180-193, February.
  2. R. Aumann, 2010. "Correlated Equilibrium as an expression of Bayesian Rationality," Levine's Bibliography 513, UCLA Department of Economics.
  3. Rubinstein, Ariel, 1991. "Comments on the Interpretation of Game Theory," Econometrica, Econometric Society, vol. 59(4), pages 909-24, July.
  4. Abreu, Dilip & Rubinstein, Ariel, 1988. "The Structure of Nash Equilibrium in Repeated Games with Finite Automata," Econometrica, Econometric Society, vol. 56(6), pages 1259-81, November.
  5. Eliaz, K., 2001. "An Equilibrium for Games Played by Imperfect Organizations," Papers 2001-12, Tel Aviv.
  6. Fudenberg, Drew & Maskin, Eric, 1986. "The Folk Theorem in Repeated Games with Discounting or with Incomplete Information," Econometrica, Econometric Society, vol. 54(3), pages 533-54, May.
  7. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, December.
  8. Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June.
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Cited by:
  1. Philippe Jehiel, 2005. "Analogy-Based Expectation Equilibrium," Levine's Bibliography 784828000000000106, UCLA Department of Economics.
  2. Theodoros M. Diasakos, 2008. "Complexity and Bounded Rationality in Individual Decision Problems," Carlo Alberto Notebooks 90, Collegio Carlo Alberto.
  3. Spiegler, Ran, 2004. "Simplicity of beliefs and delay tactics in a concession game," Games and Economic Behavior, Elsevier, vol. 47(1), pages 200-220, April.
  4. Spiegler, R., 2001. "Testing Threats in Repeated Games," Papers 2001-28, Tel Aviv.
  5. Azrieli, Yaron, 2007. "Thinking categorically about others: A conjectural equilibrium approach," MPRA Paper 3843, University Library of Munich, Germany.
  6. Azrieli, Yaron, 2009. "Categorizing others in a large game," Games and Economic Behavior, Elsevier, vol. 67(2), pages 351-362, November.
  7. Tsakas Elias, 2012. "Rational belief hierarchies," Research Memorandum 004, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  8. Friederike Mengel, 2007. "Learning Across Games," Working Papers. Serie AD 2007-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  9. Maenner, Eliot, 2008. "Adaptation and complexity in repeated games," Games and Economic Behavior, Elsevier, vol. 63(1), pages 166-187, May.
  10. Ran Spiegler, 2014. "Bayesian Networks and Boundedly Rational Expectations," Discussion Papers 1417, Centre for Macroeconomics (CFM).

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