Learning by Similarity in Coordination Problems
AbstractWe study a learning process in which subjects extrapolate from their experience of similar past strategic situations to the current decision problem. When applied to coordination games, this learning process leads to contagion of behavior from problems with extreme payoffs and unique equilibria to very dissimilar problems. In the long-run, contagion results in unique behavior even though there are multiple equilibria when the games are analyzed in isolation. Characterization of the long-run state is based on a formal parallel to rational equilibria of games with subjective priors. The results of contagion due to learning share the qualitative features of those from contagion due to incomplete information, but quantitatively they differ.
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Bibliographic InfoPaper provided by The Center for Economic Research and Graduate Education - Economic Institute, Prague in its series CERGE-EI Working Papers with number wp324.
Date of creation: Apr 2007
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Similarity; learning; contagion; case-based reasoning; global games; coordination; subjective priors.;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-30 (All new papers)
- NEP-CBE-2007-09-30 (Cognitive & Behavioural Economics)
- NEP-EVO-2007-09-30 (Evolutionary Economics)
- NEP-GTH-2007-09-30 (Game Theory)
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