Tennenholtz (GEB 2004) developed Program Equilibrium to model play in a finite two-player game where each player can base their strategy on the other player's strategies. Tennenholtz's model allowed each player to produce a "loop-free" computer program that had access to the code for both players. He showed a folk theorem where any mixed-strategy individually rational play could be an equilibrium payo in this model even in a one-shot game. Kalai et al. gave a general folk theorem for correlated play in a more generic commitment model. We develop a new model of program equilibrium using general computational models and discounting the payo s based on the computation time used. We give an even more general folk theorem giving correlated-strategy payoffs down to the pure minimax of each player. We also show equilibrium in other games not covered by the earlier work.
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number
1473.
Length: Date of creation: Nov 2008 Date of revision: Handle: RePEc:nwu:cmsems:1473
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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