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Average testing and Pareto efficiency

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  • Arieli, Itai
  • Babichenko, Yakov
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    Abstract

    We propose a simple adaptive procedure for playing strategic games: average testing. In this procedure each player sticks to her current strategy if it yields a payoff that exceeds her average payoff by at least some fixed ε>0; otherwise she chooses a strategy at random. We consider generic two-person games where both players play according to the average testing procedure on blocks of k-periods. We demonstrate that for all k large enough, the pair of time-average payoffs converges (almost surely) to the 3ε-Pareto efficient boundary.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0022053112000555
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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economic Theory.

    Volume (Year): 147 (2012)
    Issue (Month): 6 ()
    Pages: 2376-2398

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    Handle: RePEc:eee:jetheo:v:147:y:2012:i:6:p:2376-2398

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    Web page: http://www.elsevier.com/locate/inca/622869

    Related research

    Keywords: Pareto efficient boundary; Learning dynamic; Average testing;

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    1. Sergiu Hart & Andreu Mas-Colell, 2004. "Stochastic Uncoupled Dynamics and Nash Equilibrium," Levine's Bibliography 122247000000000466, UCLA Department of Economics.
    2. Jörg Oechssler, 2001. "Cooperation as a Result of Learning with Aspiration Levels," Bonn Econ Discussion Papers bgse8_2001, University of Bonn, Germany.
    3. Karandikar, Rajeeva & Mookherjee, Dilip & Ray, Debraj & Vega-Redondo, Fernando, 1998. "Evolving Aspirations and Cooperation," Journal of Economic Theory, Elsevier, vol. 80(2), pages 292-331, June.
    4. Aumann, Robert J. & Sorin, Sylvain, 1989. "Cooperation and bounded recall," Games and Economic Behavior, Elsevier, vol. 1(1), pages 5-39, March.
    5. Bendor Jonathan Brodie & Kumar Sunil & Siegel David A, 2009. "Satisficing: A 'Pretty Good' Heuristic," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-38, March.
    6. Cho, In-Koo & Matsui, Akihiko, 2005. "Learning aspiration in repeated games," Journal of Economic Theory, Elsevier, vol. 124(2), pages 171-201, October.
    7. Foster, Dean P. & Young, H. Peyton, 2006. "Regret testing: learning to play Nash equilibrium without knowing you have an opponent," Theoretical Economics, Econometric Society, vol. 1(3), pages 341-367, September.
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