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Equilibrium Concepts for Boundedly Rational Behavior in Games

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Author Info
Markus Pasche () (University of Jena, Faculty of Economics)

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Abstract

The paper extends the Nash equilibrium concept to account for arbitrary behavioral heuristics. Players are allowed not only to choose strategies, but also to select behavioral rules how to choose strategies. It is argued that behavioral profiles are in equilibrium if no player can benefit from deviating to another strategy, another behavioral rule or its parametrization. It turns out that in general payoff maximization is not a dominant behavioral rule. Furthermore it is shown that heterogeneous behavior may endogeneously evolve even in case of a unique symmetric Nash equilibrium.

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Publisher Info
Paper provided by Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät in its series Working Paper Series B with number 2001-03.

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Date of creation: 01 May 2001
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Handle: RePEc:jen:jenavo:2001-03

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Related research
Keywords: Nash equilibrium; behavioral profiles; heterogenity; bounded rationality;

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Find related papers by JEL classification:
C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June. [Downloadable!] (restricted)
  2. Shubik, Martin, 1996. "Why equilibrium? A note on the noncooperative equilibria of some matrix games," Journal of Economic Behavior & Organization, Elsevier, vol. 29(3), pages 537-539, May. [Downloadable!] (restricted)
  3. Hey, John D & Orme, Chris, 1994. "Investigating Generalizations of Expected Utility Theory Using Experimental Data," Econometrica, Econometric Society, vol. 62(6), pages 1291-1326, November. [Downloadable!] (restricted)
  4. Rosenthal, Robert W, 1989. "A Bounded-Rationality Approach to the Study of Noncooperative Games," International Journal of Game Theory, Springer, vol. 18(3), pages 273-91.
  5. Barton L. Lipman, 1995. "Information Processing and Bounded Rationality: A Survey," Canadian Journal of Economics, Canadian Economics Association, vol. 28(1), pages 42-67, February. [Downloadable!] (restricted)
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  6. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-66, May. [Downloadable!] (restricted)
  7. Mainwaring, Lynn, 1997. "Maximisation and melioration as alternative forms of firm behavior," Journal of Economic Behavior & Organization, Elsevier, vol. 32(3), pages 395-411, March. [Downloadable!] (restricted)
  8. Reinoud Joosten, 1996. "Deterministic evolutionary dynamics: a unifying approach," Journal of Evolutionary Economics, Springer, vol. 6(3), pages 313-324.
  9. Rosenthal, Robert W., 1993. "Rules of thumb in games," Journal of Economic Behavior & Organization, Elsevier, vol. 22(1), pages 1-13, September. [Downloadable!] (restricted)
    Other versions:
  10. Abreu, Dilip & Rubinstein, Ariel, 1988. "The Structure of Nash Equilibrium in Repeated Games with Finite Automata," Econometrica, Econometric Society, vol. 56(6), pages 1259-81, November. [Downloadable!] (restricted)
  11. Sugden, Robert, 1985. "Why Be Consistent? A Critical Analysis of Consistency Requirements in Choice Theory," Economica, London School of Economics and Political Science, vol. 52(206), pages 167-83, May. [Downloadable!] (restricted)
  12. Schoemaker, Paul J. H., 1991. "Choices involving uncertain probabilities : Tests of generalized utility models," Journal of Economic Behavior & Organization, Elsevier, vol. 16(3), pages 295-317, December. [Downloadable!] (restricted)
  13. Harless, David W & Camerer, Colin F, 1994. "The Predictive Utility of Generalized Expected Utility Theories," Econometrica, Econometric Society, vol. 62(6), pages 1251-89, November. [Downloadable!] (restricted)
  14. Camerer, Colin F, 1997. "Progress in Behavioral Game Theory," Journal of Economic Perspectives, American Economic Association, vol. 11(4), pages 167-88, Fall. [Downloadable!] (restricted)
  15. Conlisk, John, 1988. "Optimization cost," Journal of Economic Behavior & Organization, Elsevier, vol. 9(3), pages 213-228, April. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Markus Pasche, 2002. "Playing Fair: Rationality and Norm-guided Behavior in Games," Working Paper Series B 2002-02, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät. [Downloadable!]
  2. Markus Pasche, 2002. "Heterogeneous Behavioral Rules in the Oligopolistic Case," Working Paper Series B 2002-01, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät. [Downloadable!]
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