Testable Restrictions of Nash Equilibrium in Games with Continuous Domains
AbstractThis paper studies the falsiability of the hypothesis of Nash behavoir, for the case of a finite number of players who choose from continuous domains, subject to constraints. The results obtained here are negative. Assuming the observation of finite data sets, and using weak, but non-trivial, requirements for rationalizability, I show that the hypotesis is falsifiable, as it imposes nontautological, nonparametric testable restrictions. An assessment of these restrictions, however, shows that they are extremely weak, and that a researcher should expect, before observing the data set, that the test based on these restrictions will be passed by observed data. Without further specif assumptions, there do not exist harsher tests, since the conditions derived here also turn out to be sufficient.Moreover, ruling out the possibility that individuals may be cooperating so as to attain Pareto-efficient outcomes is impossible, as this behavior is in itself unfalsifiable with finite data sets. Imposing aggregation, or strategic complementary and/or substitutability, if theoretically plausible, may provide for a harsher test.
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Bibliographic InfoPaper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 229.
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Game theory; testable restrictions; revealed preferences.;
Other versions of this item:
- Andrés Carvajal, 2003. "Testable Restrictions of Nash Equilibrium in Games with Continuous Domains," BORRADORES DE ECONOMIA 003555, BANCO DE LA REPÚBLICA.
- Andrés Carvajal, 2004. "Testable Restrictions of Nash Equilibrium in Games with Continuous Domains," Royal Holloway, University of London: Discussion Papers in Economics 04/26, Department of Economics, Royal Holloway University of London, revised Nov 2004.
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
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