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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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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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References

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  1. Rossella Argenziano & Itzhak Gilboa, 2012. "History as a coordination device," Theory and Decision, Springer, vol. 73(4), pages 501-512, October.
  2. Aviad Heifetz & Chris Shannon & Yossi Spiegel, 2005. "The Dynamic Evolution of Preferences," Discussion Papers 1415, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  7. Alan Beggs, 2005. "Learning in Bayesian Games with Binary Actions," Economics Series Working Papers 232, University of Oxford, Department of Economics.
  8. Jonathan Weinstein & Muhamet Yildiz, 2007. "A Structure Theorem for Rationalizability with Application to Robust Predictions of Refinements," Econometrica, Econometric Society, vol. 75(2), pages 365-400, 03.
  9. Carlsson, H. & Damme, E.E.C. van, 1993. "Global games and equilibrium selection," Open Access publications from Tilburg University urn:nbn:nl:ui:12-154416, Tilburg University.
  10. 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.
  11. LiCalzi Marco, 1995. "Fictitious Play by Cases," Games and Economic Behavior, Elsevier, vol. 11(1), pages 64-89, October.
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  13. Jehiel, Philippe & Koessler, Frédéric, 2008. "Revisiting games of incomplete information with analogy-based expectations," Games and Economic Behavior, Elsevier, vol. 62(2), pages 533-557, March.
  14. Nachbar, J H, 1990. ""Evolutionary" Selection Dynamics in Games: Convergence and Limit Properties," International Journal of Game Theory, Springer, vol. 19(1), pages 59-89.
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Citations

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Cited by:
  1. Friederike Mengel, 2007. "Learning Across Games," Working Papers. Serie AD 2007-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  2. Steiner, Jakub & Stewart, Colin, 2014. "Price Distortions in High-Frequency Markets," CEPR Discussion Papers 9817, C.E.P.R. Discussion Papers.
  3. Sergei Izmalkov & Muhamet Yildiz, 2009. "Investor Sentiments," Working Papers w0138, Center for Economic and Financial Research (CEFIR).
  4. 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).
  5. Timothy N. Cason & Anya C. Savikhin & Roman Sheremeta, 2011. "Behavioral Spillovers in Coordination Games," Working Papers 11-20, Chapman University, Economic Science Institute.
  6. Mohlin, Erik, 2014. "Optimal categorization," Journal of Economic Theory, Elsevier, vol. 152(C), pages 356-381.
  7. Mohlin, Erik, 2012. "Evolution of theories of mind," Games and Economic Behavior, Elsevier, vol. 75(1), pages 299-318.
  8. 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.
  9. Christoph March, 2011. "Adaptive social learning," PSE Working Papers halshs-00572528, HAL.
  10. 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).
  11. Wolfgang Kuhle, 2013. "A Global Game with Heterogenous Priors," Papers 1312.7860, arXiv.org.
  12. 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.
  13. Rossella Argenziano & Itzhak Gilboa, 2012. "History as a coordination device," Theory and Decision, Springer, vol. 73(4), pages 501-512, October.

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