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Contagion through Learning

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  • Jakub Steiner

    ()

  • Colin Stewart

Abstract

We study learning in a large class of complete information normal form games. Players continually face new strategic situations and must form beliefs by extrapolation from similar past situations. We characterize the long-run outcomes of learning in terms of iterated dominance in a related incomplete information game with subjective priors. The use of extrapolations in learning may generate contagion of actions across games even if players learn only from games with payoffs very close to the current ones. Contagion may lead to unique long-run outcomes where multiplicity would occur if players learned through repeatedly playing the same game. The process of contagion through learning is formally related to contagion in global games, although the outcomes generally differ.

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File URL: http://www.econ.ed.ac.uk/papers/learning070809.pdf
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Bibliographic Info

Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number 151.

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Length: 35
Date of creation: 01 Dec 2006
Date of revision: 10 Aug 2007
Handle: RePEc:edn:esedps:151

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Keywords: Similarity; learning; contagion; case-based reasoning; global games; coordination; subjective priors.;

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  8. Jakub Steiner & Colin Stewart, 2007. "Learning by Similarity in Coordination Problems," CERGE-EI Working Papers wp324, The Center for Economic Research and Graduate Education - Economic Institute, Prague.
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Citations

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Cited by:
  1. Wolfgang Kuhle, 2013. "A Global Game with Heterogenous Priors," Papers 1312.7860, arXiv.org.
  2. Mohlin, Erik, 2010. "Evolution of Theories of Mind," Working Paper Series in Economics and Finance 0728, Stockholm School of Economics, revised 12 May 2010.
  3. Cason, Timothy & Savikhin, Anya & Sheremeta, Roman, 2011. "Behavioral Spillovers in Coordination Games," MPRA Paper 52106, University Library of Munich, Germany.
  4. Arifovic, Jasmina & Hua Jiang, Janet & Xu, Yiping, 2013. "Experimental evidence of bank runs as pure coordination failures," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2446-2465.
  5. Christoph March, 2011. "Adaptive social learning," PSE Working Papers halshs-00572528, HAL.
  6. Mengel, Friederike, 2012. "Learning across games," Games and Economic Behavior, Elsevier, vol. 74(2), pages 601-619.
  7. Mengel Friederike & Sciubba Emanuela, 2010. "Extrapolation in Games of Coordination and Dominance Solvable Games," Research Memorandum 034, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  8. Jakub Steiner & Colin Stewart, 2012. "Price Distortions in High-Frequency Markets," Discussion Papers 1549, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  9. Grimm, Veronika & Mengel, Friederike, 2009. "An Experiment on Learning in a Multiple Games Environment," Research Memorandum 007, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
  10. Daron Acemoglu & Matthew O. Jackson, 2011. "History, Expectations, and Leadership in the Evolution of Social Norms," NBER Working Papers 17066, National Bureau of Economic Research, Inc.
  11. Sergei Izmalkov & Muhamet Yildiz, 2009. "Investor Sentiments," Working Papers w0138, Center for Economic and Financial Research (CEFIR).
  12. Mohlin, Erik, 2009. "Optimal Categorization," Working Paper Series in Economics and Finance 721, Stockholm School of Economics, revised 08 Jul 2009.

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