We introduce a new solution concept for games in extensive form with perfect information: the valuation equilibrium. The moves of each player are partitioned into similarity classes. A valuation of the player is a real valued function on the set of her similarity classes. At each node a player chooses a move that belongs to a class with maximum valuation. The valuation of each player is \emph{consistent} with the strategy profile in the sense that the valuation of a similarity class is the player expected payoff given that the path (induced by the strategy profile) intersects the similarity class. The solution concept is applied to decision problems and multi-player extensive form games. It is contrasted with existing solution concepts. An aspiration-based approach is also proposed, in which the similarity partitions are determined endogenously. The corresponding equilibrium is called the aspiration-based valuation equilibrium (ASVE). While the Subgame Perfect Nash Equilibrium is always an ASVE, there are other ASVE in general. But, in zero-sum two-player games without chance moves every player must get her value in any ASVE.
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
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Jakub Steiner & Colin Stewart, 2006.
"Contagion through Learning,"
ESE Discussion Papers
151, Edinburgh School of Economics, University of Edinburgh, revised 10 Aug 2007.
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