Inspired by the social psychology literature, we study the implications of categorical thinking on decision making in the context of a large normal form game. Every agent has a categorization (partition) of her opponents and can only observe the average behavior in each category. A strategy profile is a Conjectural Categorical Equilibrium (CCE) with respect to a given categorization profile if every player's strategy is a best response to some consistent conjecture about the strategies of her opponents. We show that, for a wide family of games and for a particular categorization profile, every CCE becomes almost Nash as the number of players grows. An equivalence of CCE and Nash equilibrium is achieved in the settings of a non-atomic game. This highlights the advantage of categorization as a simplifying mechanism in complex environments. With much less information in their hands agents behave as if they see the full picture. Some properties of CCE when players categorize `non-optimally' are also considered.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. 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.
Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
3843.
Find related papers by JEL classification: D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
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.:
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.)