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A Necessary And Sufficient Condition For Convergence Of Statistical To Strategic Equilibria Of Market Games

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  • DIMITRIOS P. TSOMOCOS

    ()
    (Said Business School & St. Edmund Hall, University of Oxford, Park End Street, Oxford, Oxfordshire OX1 1HP, UK; Financial Markets Group, LSE, UK)

  • DIMITRIS VOLIOTIS

    ()
    (Department of Banking and Financial Management, University of Piraeus, 80 Karaoli & Dimitriou str., Piraeus, 18534, Greece)

Abstract

We analyze a market game where traders are heterogeneous with respect to their rationality level and have asymmetric information. The market mechanism results into a statistical equilibrium, where traders randomise among their available actions due to their limited rationality. We provide a necessary and sufficient condition for convergence of statistical to strategic equilibria of market games, when traders become more informed and increasingly more rational.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal International Game Theory Review.

Volume (Year): 11 (2009)
Issue (Month): 04 ()
Pages: 479-489

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Handle: RePEc:wsi:igtrxx:v:11:y:2009:i:04:p:479-489

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Related research

Keywords: Market games; bounded rationality; rational learning; C70; D51; D81; D83;

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