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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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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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  9. Hans Carlsson & Eric van Damme, 1993. "Global Games and Equilibrium Selection," Levine's Working Paper Archive 122247000000001088, David K. Levine.
  10. Aviad Heifetz & Chris Shannon & Yossi Spiegel, 2007. "The Dynamic Evolution of Preferences," Economic Theory, Springer, vol. 32(2), pages 251-286, August.
  11. Alan Beggs, 2005. "Learning in Bayesian Games with Binary Actions," Economics Series Working Papers 232, University of Oxford, Department of Economics.
  12. 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.
  13. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-77, November.
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  15. Rossella Argenziano & Itzhak Gilboa, 2012. "History as a coordination device," Theory and Decision, Springer, vol. 73(4), pages 501-512, October.
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Citations

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Cited by:
  1. Steiner, Jakub & Stewart, Colin, 2014. "Price Distortions in High-Frequency Markets," CEPR Discussion Papers 9817, C.E.P.R. Discussion Papers.
  2. Arifovic, Jasmina & Hua Jiang, Janet & Xu, Yiping, 2013. "Experimental evidence of bank runs as pure coordination failures," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2446-2465.
  3. Mengel, Friederike, 2012. "Learning across games," Games and Economic Behavior, Elsevier, vol. 74(2), pages 601-619.
  4. Christoph March, 2011. "Adaptive social learning," PSE Working Papers halshs-00572528, HAL.
  5. Mohlin, Erik, 2010. "Evolution of Theories of Mind," Working Paper Series in Economics and Finance 0728, Stockholm School of Economics, revised 12 May 2010.
  6. Mohlin, Erik, 2014. "Optimal categorization," Journal of Economic Theory, Elsevier, vol. 152(C), pages 356-381.
  7. Sergei Izmalkov & Muhamet Yildiz, 2009. "Investor Sentiments," Working Papers w0138, Center for Economic and Financial Research (CEFIR).
  8. Cason, Timothy & Savikhin, Anya & Sheremeta, Roman, 2011. "Behavioral Spillovers in Coordination Games," MPRA Paper 52106, University Library of Munich, Germany.
  9. Friederike Mengel & Emanuela Sciubba, 2010. "Extrapolation in Games of Coordination and Dominance Solvable Games," Working Papers 2010.148, Fondazione Eni Enrico Mattei.
  10. Wolfgang Kuhle, 2013. "A Global Game with Heterogenous Priors," Papers 1312.7860, arXiv.org.
  11. Grimm, Veronika & Mengel, Friederike, 2012. "An experiment on learning in a multiple games environment," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2220-2259.
  12. Rossella Argenziano & Itzhak Gilboa, 2012. "History as a coordination device," Theory and Decision, Springer, vol. 73(4), pages 501-512, October.
  13. 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.

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