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Contagion through Learning

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Author Info
Jakub Steiner ()
Colin Stewart

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

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This paper has been announced in the following NEP Reports: References listed on IDEAS
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  7. Antoine Billot & Itzhak Gilboa & David Schmeidler & Dov Samet, 2004. "Probabilities as Similarity-Weighted Frequencies," Cowles Foundation Discussion Papers 1492, Cowles Foundation, Yale University. [Downloadable!]
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  8. Philippe Jehiel & Dov Samet, 2003. "Valuation Equilibria," Game Theory and Information 0310003, EconWPA. [Downloadable!]
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  9. Philippe Jehiel & Frédéric Koessler, 2006. "Revisiting Games of Incomplete Information with Analogy-Based Expectations," Levine's Bibliography 122247000000000252, UCLA Department of Economics. [Downloadable!]
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  10. Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September. [Downloadable!] (restricted)
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  11. 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.
  12. Fabrizio Germano, 2004. "Stochastic Evolution of Rules for Playing Normal Form Games," Economics Working Papers 761, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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Cited by:
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  1. Friederike Mengel, 2007. "Learning Across Games," Working Papers. Serie AD 2007-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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