Advanced Search
MyIDEAS: Login to save this article or follow this journal

Bounded rationality, strategy simplification, and equilibrium

Contents:

Author Info

  • Hubie Chen

    ()

Registered author(s):

    Abstract

    It is frequently suggested that predictions made by game theory could be improved by considering computational restrictions when modeling agents. Under the supposition that players in a game may desire to balance maximization of payoff with minimization of strategy complexity, Rubinstein and co-authors studied forms of Nash equilibrium where strategies are maximally simplified in that no strategy can be further simplified without sacrificing payoff. Inspired by this line of work, we introduce a notion of equilibrium whereby strategies are also maximally simplified, but with respect to a simplification procedure that is more careful in that a player will not simplify if the simplification incents other players to deviate. We study such equilibria in two-player machine games in which players choose finite automata that succinctly represent strategies for repeated games; in this context, we present techniques for establishing that an outcome is at equilibrium and present results on the structure of equilibria. Copyright Springer-Verlag 2013

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://hdl.handle.net/10.1007/s00182-011-0293-7
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Bibliographic Info

    Article provided by Springer in its journal International Journal of Game Theory.

    Volume (Year): 42 (2013)
    Issue (Month): 3 (August)
    Pages: 593-611

    as in new window
    Handle: RePEc:spr:jogath:v:42:y:2013:i:3:p:593-611

    Contact details of provider:
    Web page: http://link.springer.de/link/service/journals/00182/index.htm

    Order Information:
    Web: http://link.springer.de/orders.htm

    Related research

    Keywords: Bounded rationality; Automata; Repeated games; Simplification; Strategy complexity;

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Spiegler, R., 2001. "Testing Threats in Repeated Games," Papers 2001-28, Tel Aviv.
    2. Tennenholtz, Moshe, 2004. "Program equilibrium," Games and Economic Behavior, Elsevier, vol. 49(2), pages 363-373, November.
    3. Banks, J.S. & Sundaram, R.K., 1989. "Repeated Games, Finite Automata, And Complexity," RCER Working Papers 183, University of Rochester - Center for Economic Research (RCER).
    4. Ben-porath, Elchanan, 1990. "The complexity of computing a best response automaton in repeated games with mixed strategies," Games and Economic Behavior, Elsevier, vol. 2(1), pages 1-12, March.
    5. 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.
    6. Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June.
    7. Lance Fortnow & Rahul Santhanam, 2009. "Bounding Rationality by Discounting Time," Discussion Papers 1481, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    8. Binmore, Ken, 1987. "Modeling Rational Players: Part I," Economics and Philosophy, Cambridge University Press, vol. 3(02), pages 179-214, October.
    9. O. Gossner, 1999. "Repeated games played by cryptographically sophisticated players," THEMA Working Papers 99-07, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    10. Binmore, Ken, 1988. "Modeling Rational Players: Part II," Economics and Philosophy, Cambridge University Press, vol. 4(01), pages 9-55, April.
    11. Kalai, Ehud & Stanford, William, 1988. "Finite Rationality and Interpersonal Complexity in Repeated Games," Econometrica, Econometric Society, vol. 56(2), pages 397-410, March.
    12. Neyman, Abraham, 1985. "Bounded complexity justifies cooperation in the finitely repeated prisoners' dilemma," Economics Letters, Elsevier, vol. 19(3), pages 227-229.
    13. Gilboa, Itzhak, 1988. "The complexity of computing best-response automata in repeated games," Journal of Economic Theory, Elsevier, vol. 45(2), pages 342-352, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:spr:jogath:v:42:y:2013:i:3:p:593-611. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.