Should I remember more than you? - On the best response to factor-based strategies -
AbstractIn this paper we offer a new approach to modeling strategies of bounded complexity, the so-called factor-based strategies. In our model, the strategy of a player in the multi-stage game does not directly map the set of histories to the set of her actions. Instead, the player's perception of is represented by a factor : -> where reflects the "cognitive complexity" of the player. Formally, mapping sends each history to an element of a factor space that represents its equivalence class. The play of the player can then be conditioned just on the elements of the set From the perspective of the original multi-stage game we say that a function from o is a factor of a strategy if there exists a function from to the set of actions of the player such that = In this case we say that the strategy is -factor-asedStationary strategies and strategies played by finite automata and strategies with bounded recall are the most prominent examples of factor-based strategies. In the discounted infinitely repeated game with perfect monitoring, a best reply to a profile of -factor-base strategies need not be a -factor-base strategy. However, if the factor is recursive, namely its value (1 , . . . , ) on a finite string of action profiles ( , . . . , ) is a function of (1 , . . . , - ) and , then for every profile of factor-based strategies there is a best reply that is a pure factor-based strategy. We also study factor-based strategies in the more general case of stochastic games.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics in its series Jena Economic Research Papers with number 2010-082.
Date of creation: 01 Dec 2010
Date of revision:
Bounded rationality; factor-based strategies; bounded recall strategies; finite automata;
Find related papers by JEL classification:
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Markus Pasche).
If references are entirely missing, you can add them using this form.