Two subjects have to repeatedly choose between two alternatives, A and B, where payoffs of an A or B-choice depend on the choices made by both players in a number of previous choices. Locally, alternative A gives always more payoff than alternative B. However, in terms of overall payoffs exclusive choice of B is a better strategy. The equilibrium predicted by the theory of melioration is to exclusively play A, while the Nash equilibrium is to almost exclusively play B. The predictive values of such equilibria are analyzed under three different informational conditions. Special attention is paid to the learning processes exhibited by players.
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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number
bgse23_2001.
Length: 26 Date of creation: Oct 2001 Date of revision: Handle: RePEc:bon:bonedp:bgse23_2001
Contact details of provider: Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany Fax: +49 228 73 9221 Web page: http://www.bgse.uni-bonn.de/index.php?id=494
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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