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Contagion through learning

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Author Info

  • Steiner, Jakub

    () (Economics, University of Edinburgh)

  • Stewart, Colin

    () (Department of Economics, University of Toronto)

Abstract

We study learning in a large class of complete information normal form games. Players continually face new strategic situations and must form beliefs by extrapolation from similar past situations. We characterize the long-run outcomes of learning in terms of iterated dominance in a related incomplete information game with subjective priors. The use of extrapolations in learning may generate contagion of actions across games even if players learn only from games with payoffs very close to the current ones. Contagion may lead to unique long-run outcomes where multiplicity would occur if players learned through repeatedly playing the same game. The process of contagion through learning is formally related to contagion in global games, although the outcomes generally differ.

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File URL: http://econtheory.org/ojs/index.php/te/article/viewFile/20080431/2128/111
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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 3 (2008)
Issue (Month): 4 (December)
Pages:

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Handle: RePEc:the:publsh:416

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Web page: http://econtheory.org

Related research

Keywords: Similarity; learning; contagion; case-based reasoning; global games;

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References

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  1. Samuelson, L. & Zhang, J., 1991. "Evolutionary Stability in Asymmetric Games," Papers 9132, Tilburg - Center for Economic Research.
  2. Alan Beggs, 2005. "Learning in Bayesian Games with Binary Actions," Economics Series Working Papers 232, University of Oxford, Department of Economics.
  3. Dekel, Eddie & Fudenberg, Drew & Levine, David K., 2004. "Learning to play Bayesian games," Games and Economic Behavior, Elsevier, vol. 46(2), pages 282-303, February.
  4. Hans Carlsson & Eric van Damme, 1993. "Global Games and Equilibrium Selection," Levine's Working Paper Archive 122247000000001088, David K. Levine.
  5. Fabrizio Germano, 2004. "Stochastic evolution of rules for playing normal form games," Economics Working Papers 761, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Mengel, Friederike, 2012. "Learning across games," Games and Economic Behavior, Elsevier, vol. 74(2), pages 601-619.
  7. Antoine Billot & Itzhak Gilboa & David Schmeidler & Dov Samet, 2004. "Probabilities as Similarity-Weighted Frequencies," Cowles Foundation Discussion Papers 1492, Cowles Foundation for Research in Economics, Yale University.
  8. Jonathan Weinstein & Muhamet Yildiz, 2007. "A Structure Theorem for Rationalizability with Application to Robust Predictions of Refinements," Econometrica, Econometric Society, vol. 75(2), pages 365-400, 03.
  9. Philippe Jehiel & Frederic Koessler, 2005. "Revisiting Games of Incomplete Information with Analogy-Based Expectations," THEMA Working Papers 2005-04, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  10. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
  11. Rossella Argenziano & Itzhak Gilboa, 2012. "History as a coordination device," Theory and Decision, Springer, vol. 73(4), pages 501-512, October.
  12. Aviad Heifetz & Chris Shannon & Yossi Spiegel, 2007. "The Dynamic Evolution of Preferences," Economic Theory, Springer, vol. 32(2), pages 251-286, August.
  13. M. Li Calzi, 2010. "Fictitious Play By Cases," Levine's Working Paper Archive 407, David K. Levine.
  14. Samuelson, Larry & Zhang, Jianbo, 1992. "Evolutionary stability in asymmetric games," Journal of Economic Theory, Elsevier, vol. 57(2), pages 363-391, August.
  15. Jakub Steiner & Colin Stewart, 2007. "Learning by Similarity in Coordination Problems," CERGE-EI Working Papers wp324, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
  16. Nachbar, J H, 1990. ""Evolutionary" Selection Dynamics in Games: Convergence and Limit Properties," International Journal of Game Theory, Springer, vol. 19(1), pages 59-89.
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Cited by:
  1. Jakub Steiner & Colin Stewart, 2012. "Price Distortions in High-Frequency Markets," Discussion Papers 1549, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  2. Mohlin, Erik, 2010. "Evolution of Theories of Mind," Working Paper Series in Economics and Finance 0728, Stockholm School of Economics, revised 12 May 2010.
  3. Cason, Timothy N. & Savikhin, Anya C. & Sheremeta, Roman M., 2012. "Behavioral spillovers in coordination games," European Economic Review, Elsevier, vol. 56(2), pages 233-245.
  4. Daron Acemoglu & Matthew O. Jackson, 2011. "History, Expectations, and Leadership in the Evolution of Social Norms," NBER Working Papers 17066, National Bureau of Economic Research, Inc.
  5. Mengel Friederike & Sciubba Emanuela, 2010. "Extrapolation in Games of Coordination and Dominance Solvable Games," Research Memoranda 034, Maastricht : METEOR, Maastricht Research School of Economics of Technology and Organization.
  6. Mohlin, Erik, 2009. "Optimal Categorization," Working Paper Series in Economics and Finance 721, Stockholm School of Economics, revised 08 Jul 2009.
  7. Sergei Izmalkov & Muhamet Yildiz, 2010. "Investor Sentiments," American Economic Journal: Microeconomics, American Economic Association, vol. 2(1), pages 21-38, February.
  8. Christoph March, 2011. "Adaptive social learning," PSE Working Papers halshs-00572528, HAL.

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