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Contagion through Learning

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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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  • Jakub Steiner, 2007. "Contagion through Learning," Edinburgh School of Economics Discussion Paper Series 151, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:151
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    More about this item

    Keywords

    similarity; learning; contagion; case-based reasoning; global games; coordination; subjective priors;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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