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Adaptation and complexity in repeated games

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  • Maenner, Eliot
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    Abstract

    The paper presents a learning model for two-player infinitely repeated games. In an inference step players construct minimally complex inferences of strategies based on observed play, and in an adaptation step players choose minimally complex best responses to an inference. When players randomly select an inference from a probability distribution with full support the set of steady states is a subset of the set of Nash equilibria in which only stage game Nash equilibria are played. When players make 'cautious' inferences the set of steady states is the subset of self-confirming equilibria with Nash outcome paths. When players use different inference rules, the set of steady states can lie between the previous two cases.

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    Bibliographic Info

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

    Volume (Year): 63 (2008)
    Issue (Month): 1 (May)
    Pages: 166-187

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    Handle: RePEc:eee:gamebe:v:63:y:2008:i:1:p:166-187

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

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    1. Spiegler, Ran, 2002. "Equilibrium in Justifiable Strategies: A Model of Reason-Based Choice in Extensive-Form Games," Review of Economic Studies, Wiley Blackwell, vol. 69(3), pages 691-706, July.
    2. Drew Fudenberg & David K. Levine, 1993. "Self-Confirming Equilibrium," Levine's Working Paper Archive 2147, David K. Levine.
    3. Kalyan Chatterjee & Hamid Sabourian, 1998. "Multiperson Bargaining and Strategic Complexity," CRIEFF Discussion Papers 9808, Centre for Research into Industry, Enterprise, Finance and the Firm.
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    6. Volij, Oscar, 2002. "In Defense of Defect," Staff General Research Papers 10125, Iowa State University, Department of Economics.
    7. 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.
    8. Eliaz, Kfir, 2003. "Nash equilibrium when players account for the complexity of their forecasts," Games and Economic Behavior, Elsevier, vol. 44(2), pages 286-310, August.
    9. Jeheil Phillippe, 1995. "Limited Horizon Forecast in Repeated Alternate Games," Journal of Economic Theory, Elsevier, vol. 67(2), pages 497-519, December.
    10. Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June.
    11. Jehiel, Philippe, 2001. "Limited Foresight May Force Cooperation," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 369-91, April.
    12. 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.
    13. Binmore, Kenneth G. & Samuelson, Larry, 1992. "Evolutionary stability in repeated games played by finite automata," Journal of Economic Theory, Elsevier, vol. 57(2), pages 278-305, August.
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    Cited by:
    1. Eilon Solan & Penélope Hernández, 2014. "Bounded Computational Capacity Equilibrium," Discussion Papers in Economic Behaviour 0314, University of Valencia, ERI-CES.

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