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Strategic interactions, incomplete information and learning

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  • Michele Berardi

Abstract

In a model of incomplete, heterogeneous information, with externalities and strategic interactions, we analyse the possibility of adaptive learning to act as coordination device. We build on the framework introduced by Angeletos and Pavan (2007) and extend it to a setting where agents need to learn to coordinate. We analyse conditions under which learning obtains, and show that adaptive learning can solve the problem of socially ine¢ cient coordination.

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File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/cgbcr/discussionpapers/dpcgbcr157.pdf
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Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 157.

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Length: 22 pages
Date of creation: 2011
Date of revision:
Handle: RePEc:man:cgbcrp:157

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  1. George W. Evans & Seppo Honkapohja, 2002. "Expectational Stability of Stationary Sunspot Equilibria in a Forward-looking Linear Model," University of Oregon Economics Department Working Papers, University of Oregon Economics Department 2001-9, University of Oregon Economics Department, revised 14 Jan 2002.
  2. Alan Beggs, 2005. "Learning in Bayesian Games with Binary Actions," Economics Series Working Papers 232, University of Oxford, Department of Economics.
  3. Townsend, Robert M, 1983. "Forecasting the Forecasts of Others," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(4), pages 546-88, August.
  4. George W. Evans & Bruce McGough, 2002. "Stable Sunspot Solutions in Models with Predetermined Variables," University of Oregon Economics Department Working Papers, University of Oregon Economics Department 2002-16, University of Oregon Economics Department, revised 29 May 2003.
  5. Evans George W. & Guesnerie Roger, 1993. "Rationalizability, Strong Rationality, and Expectational Stability," Games and Economic Behavior, Elsevier, Elsevier, vol. 5(4), pages 632-646, October.
  6. Marcet, Albert & Sargent, Thomas J, 1989. "Convergence of Least-Squares Learning in Environments with Hidden State Variables and Private Information," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 97(6), pages 1306-22, December.
  7. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1521-1534, December.
  8. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2007. "Dynamic Global Games of Regime Change: Learning, Multiplicity, and the Timing of Attacks," Econometrica, Econometric Society, Econometric Society, vol. 75(3), pages 711-756, 05.
  9. Guesnerie, Roger, 1992. "An Exploration of the Eductive Justifications of the Rational-Expectations Hypothesis," American Economic Review, American Economic Association, American Economic Association, vol. 82(5), pages 1254-78, December.
  10. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(2), pages 193-227, April.
  11. V. Crawford, 2010. "Adaptive Dynamics in Coordination Games," Levine's Working Paper Archive 404, David K. Levine.
  12. Woodford, Michael, 1990. "Learning to Believe in Sunspots," Econometrica, Econometric Society, Econometric Society, vol. 58(2), pages 277-307, March.
  13. Azariadis, Costas, 1981. "Self-fulfilling prophecies," Journal of Economic Theory, Elsevier, Elsevier, vol. 25(3), pages 380-396, December.
  14. Morris, Stephen & Shin, Hyun Song, 1997. "Unique Equilibrium in a Model of Self-fulfilling Currency Attacks," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1687, C.E.P.R. Discussion Papers.
  15. Joel Carton & Eran A. Guse, 2010. "Replicator Dynamic Learning in Muth's Model of Price Movements," Working Papers 10-18, Department of Economics, West Virginia University.
  16. Branch, William A. & McGough, Bruce, 2009. "A New Keynesian model with heterogeneous expectations," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 33(5), pages 1036-1051, May.
  17. Evans George W. & Honkapohja Seppo, 1994. "On the Local Stability of Sunspot Equilibria under Adaptive Learning Rules," Journal of Economic Theory, Elsevier, Elsevier, vol. 64(1), pages 142-161, October.
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