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Paying attention to payoffs in analogy-based learning

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Author Info

  • Topi Miettinen

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Abstract

This paper introduces the payoff-confirming analogy-based expectation equilibrium (PCABEE) as a way to refine the set of analogy-based equilibria and the associated admissible analogy partitions. In addition to the actions of others, own payoff history provides information about others’ strategies but, yet, non-Bayesian Nash equilibria may exist both with an incorrect and a correct prior. We provide general conditions when this happens. Two stylized employer-employee interactions, one with a correct and one with an incorrect prior, are provided illustrating how PCABEE can be used to analyze robust stereotypes and how incorrect such stereotypes may lead to discrimination.

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File URL: http://hdl.handle.net/10.1007/s00199-010-0565-7
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 50 (2012)
Issue (Month): 1 (May)
Pages: 193-222

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Handle: RePEc:spr:joecth:v:50:y:2012:i:1:p:193-222

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Web page: http://link.springer.de/link/service/journals/00199/index.htm

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Related research

Keywords: Analogy expectations; Bounded rationality; Learning; Stereotypes; Winner’s curse; C72; D82;

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Cited by:
  1. Miettinen, Topi, 2009. "The partially cursed and the analogy-based expectation equilibrium," Economics Letters, Elsevier, vol. 105(2), pages 162-164, November.
  2. Christoph March, 2011. "Adaptive social learning," Working Papers halshs-00572528, HAL.
  3. Miettinen, Topi, 2008. "Analogy-based Expectations and the Partially Cursed Equilibrium," Working Paper Series in Economics and Finance 708, Stockholm School of Economics, revised 12 Dec 2008.
  4. Christoph March, 2011. "Adaptive social learning," PSE Working Papers halshs-00572528, HAL.

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