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Analogy-Based Expectation Equilibrium

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Author Info
Philippe Jeniel () (Paris-Jourdan Sciences Économiques (PSE), École Normale Supérieur)

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Abstract

It is assumed that players bundle nodes in which other players must move into analogy classes, and players only have expectations about the average behavior in every class. A solution concept is proposed for multi-stage games with perfect information: at every node players choose best-responses to their analogy-based expectations, and expectations are correct on average over those various nodes pooled together into the same analogy classes. The approach is applied to a variety of games. It is shown that a player may benefit from having a coarse analogy partitioning. And for simple analogy partitioning, (1) initial cooperation followed by an end opportunistic behavior may emerge in the finitely repeated prisoner's dilemma (or in the centipede game), (2) an agreement need not be reached immediately in bargaining games with complete information.

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Publisher Info
Paper provided by Institute for Advanced Study, School of Social Science in its series Economics Working Papers with number 0003.

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Length: 38 pages
Date of creation: Mar 2001
Date of revision:
Publication status: Published in Journal of Economic Theory 123 (2005) 81-104
Handle: RePEc:ads:wpaper:0003

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Related research
Keywords: Game theory bounded rationality reasoning by analogy

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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.:

  1. Ran Spiegler, 2003. "Simplicity of Beliefs and Delay Tactics in a Concession Game," Levine's Bibliography 506439000000000208, UCLA Department of Economics. [Downloadable!]
  2. Abreu, Dilip & Rubinstein, Ariel, 1988. "The Structure of Nash Equilibrium in Repeated Games with Finite Automata," Econometrica, Econometric Society, vol. 56(6), pages 1259-81, November. [Downloadable!] (restricted)
  3. Van Damme, Eric & Selten, Reinhard & Winter, Eyal, 1990. "Alternating bid bargaining with a smallest money unit," Games and Economic Behavior, Elsevier, vol. 2(2), pages 188-201, June. [Downloadable!] (restricted)
    Other versions:
  4. Rosenthal, Robert W., 1981. "Games of perfect information, predatory pricing and the chain-store paradox," Journal of Economic Theory, Elsevier, vol. 25(1), pages 92-100, August. [Downloadable!] (restricted)
  5. Meyer, Margaret A, 1991. "Learning from Coarse Information: Biased Contests and Career Profiles," Review of Economic Studies, Blackwell Publishing, vol. 58(1), pages 15-41, January. [Downloadable!] (restricted)
  6. Philippe Jeniel, 2001. "Analogy-Based Expectation Equilibrium," Economics Working Papers 0003, Institute for Advanced Study, School of Social Science. [Downloadable!]
    Other versions:
  7. McKelvey, Richard D & Palfrey, Thomas R, 1992. "An Experimental Study of the Centipede Game," Econometrica, Econometric Society, vol. 60(4), pages 803-36, July. [Downloadable!] (restricted)
  8. Dulleck, Uwe & Oechssler, Jorg, 1997. "The absent-minded centipede," Economics Letters, Elsevier, vol. 55(3), pages 309-315, September. [Downloadable!] (restricted)
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  9. Neyman, Abraham, 1985. "Bounded complexity justifies cooperation in the finitely repeated prisoners' dilemma," Economics Letters, Elsevier, vol. 19(3), pages 227-229. [Downloadable!] (restricted)
  10. Piccione, Michele & Rubinstein, Ariel, 1997. "On the Interpretation of Decision Problems with Imperfect Recall," Games and Economic Behavior, Elsevier, vol. 20(1), pages 3-24, July. [Downloadable!] (restricted)
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  11. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August. [Downloadable!] (restricted)
  12. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January. [Downloadable!] (restricted)
  13. Tesfatsion, Leigh S., 2004. "Games, Goals, and Bounded Rationality," Staff General Research Papers 11209, Iowa State University, Department of Economics.
  14. Osborne, Martin J & Rubinstein, Ariel, 1998. "Games with Procedurally Rational Players," American Economic Review, American Economic Association, vol. 88(4), pages 834-47, September. [Downloadable!] (restricted)
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  15. Gilboa, Itzhak & Schmeidler, David, 1995. "Case-Based Decision Theory," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 605-39, August. [Downloadable!] (restricted)
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  16. Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June. [Downloadable!] (restricted)
  17. Dow, James, 1991. "Search Decisions with Limited Memory," Review of Economic Studies, Blackwell Publishing, vol. 58(1), pages 1-14, January. [Downloadable!] (restricted)
  18. Rubinstein, Ariel, 1991. "Comments on the Interpretation of Game Theory," Econometrica, Econometric Society, vol. 59(4), pages 909-24, July. [Downloadable!] (restricted)
  19. Reny Philip J., 1993. "Common Belief and the Theory of Games with Perfect Information," Journal of Economic Theory, Elsevier, vol. 59(2), pages 257-274, April. [Downloadable!] (restricted)
  20. Eliaz, Kfir, 2003. "Nash equilibrium when players account for the complexity of their forecasts," Games and Economic Behavior, Elsevier, vol. 44(2), pages 286-310, August. [Downloadable!] (restricted)
  21. Rubinstein, Ariel, 1993. "On Price Recognition and Computational Complexity in a Monopolistic Model," Journal of Political Economy, University of Chicago Press, vol. 101(3), pages 473-84, June. [Downloadable!] (restricted)
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  22. Jehiel, Philippe, 2001. "Limited Foresight May Force Cooperation," Review of Economic Studies, Blackwell Publishing, vol. 68(2), pages 369-91, April.
  23. Kreps, David M & Wilson, Robert, 1982. "Sequential Equilibria," Econometrica, Econometric Society, vol. 50(4), pages 863-94, July. [Downloadable!] (restricted)
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  24. Jeheil Phillippe, 1995. "Limited Horizon Forecast in Repeated Alternate Games," Journal of Economic Theory, Elsevier, vol. 67(2), pages 497-519, December. [Downloadable!] (restricted)
  25. Jehiel, Philippe, 1998. "Learning to Play Limited Forecast Equilibria," Games and Economic Behavior, Elsevier, vol. 22(2), pages 274-298, February. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, 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.)

  1. Azrieli, Yaron, 2007. "Thinking categorically about others: A conjectural equilibrium approach," MPRA Paper 3843, University Library of Munich, Germany, revised 06 Sep 2007. [Downloadable!]
  2. David Ettinger & Philippe Jehiel, 2005. "Towards a theory of deception," PSE Working Papers 2005-28, PSE (Ecole normale supérieure). [Downloadable!]
    Other versions:
  3. Azrieli, Yaron, 2007. "Categorization and correlation in a random-matching game," MPRA Paper 5475, University Library of Munich, Germany. [Downloadable!]
  4. Steffen Huck & Philippe Jehiel & Tom Rutter, 2006. "Information Processing and Learning: Testing the Analogy-based Expectation Approach," Levine's Bibliography 321307000000000364, UCLA Department of Economics. [Downloadable!]
  5. Roland G. Fryer, Jr. & Matthew O. Jackson, 2003. "Categorical Cognition: A Psychological Model of Categories and Identification in Decision Making," NBER Working Papers 9579, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Azrieli, Yaron, 2007. "Pure self-confirming equilibrium," MPRA Paper 3844, University Library of Munich, Germany. [Downloadable!]
  7. Roland Fryer & Matthew Jackson, 2008. "A Categorical Model of Cognition and Biased Decision Making," Contributions to Theoretical Economics, Berkeley Electronic Press, vol. 8(1), pages 1357-1357. [Downloadable!] (restricted)
  8. 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. [Downloadable!]
    Other versions:
  9. Friederike Mengel, 2007. "Learning Across Games," Working Papers. Serie AD 2007-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
  10. Philippe Jehiel, 2007. "Manipulative Auction Design," Levine's Bibliography 122247000000001547, UCLA Department of Economics. [Downloadable!]
  11. Topi Miettinen, 2007. "Learning Foundations and Complexity of the Cursed Equilibrium," Discussion Papers on Strategic Interaction 2006-40, Max Planck Institute of Economics, Strategic Interaction Group. [Downloadable!]
  12. Philippe Jehiel & Steffen Huck & Tom Rutter, 2007. "Learning Spillover and Analogy-based Expectations: a Multi-Game Experiment," Levine's Bibliography 843644000000000120, UCLA Department of Economics. [Downloadable!]
  13. Rani Spiegler, 2005. "The Market for Quacks," Levine's Bibliography 784828000000000634, UCLA Department of Economics. [Downloadable!]
  14. Philippe Jehiel & Dov Samet, 2006. "Valuation Equilibria," Levine's Bibliography 784828000000000111, UCLA Department of Economics. [Downloadable!]
    Other versions:
  15. Sendhil Mullainathan & Joshua Schwartzstein & Andrei Shleifer, 2006. "Coarse Thinking and Persuasion," NBER Working Papers 12720, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Steffen Huck & Philippe Jehiel, 2004. "Public statistics and private experience : Varying feedback information in a take or pass game," Levine's Bibliography 122247000000000733, UCLA Department of Economics. [Downloadable!]
  17. Philippe Jehiel, 2005. "Analogy-Based Expectation Equilibrium," Levine's Bibliography 784828000000000106, UCLA Department of Economics. [Downloadable!]
    Other versions:
  18. Ran Spiegler, 2001. "Testing Threats in Repeated Games," Economics Working Papers 0009, Institute for Advanced Study, School of Social Science. [Downloadable!]
  19. Steffen Huck & Philippe Jehiel & Tom Rutter, 2006. "Information Processing, Learning and Analogy-based Expectation: an Experiment," Levine's Bibliography 321307000000000541, UCLA Department of Economics. [Downloadable!]
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