Learning to Forgive
AbstractThe Folk Theorem for infinitely repeated games offers an embarrassment of riches; nowhere is equilibrium multiplicity more acute. This paper selects amongst these equilibria in the following sense. If players learn to play an infinitely repeated game using classical hypothesis testing, it is known that their strategies almost always approximate equilibria of the repeated game. It is shown here that if, in addition, they are sufficiently conservative in adopting their hypotheses, then almost all of the time is spent approximating an efficient subset of equilibria that share a forgiving property. This result provides theoretical justification for the general sense amongst practitioners that efficiency is focal in such games.
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Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 296.
Date of creation: 01 Dec 2006
Date of revision:
Repeated Games; Folk Theorem; Learning; Hypothesis Testing; Equilibrium Selection;
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-14 (All new papers)
- NEP-EVO-2007-04-14 (Evolutionary Economics)
- NEP-GTH-2007-04-14 (Game Theory)
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.:
- Drew Fudenberg & Eric Maskin, 1987.
"On the Dispensability of Public Randomization in Discounted Repeated Games,"
467, Massachusetts Institute of Technology (MIT), Department of Economics.
- Fudenberg, Drew & Maskin, Eric, 1991. "On the dispensability of public randomization in discounted repeated games," Journal of Economic Theory, Elsevier, vol. 53(2), pages 428-438, April.
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