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Sequential coordination, higher-order belief dynamics and the E-stability principle

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  • Gaballo, Gaetano

Abstract

This paper explores convergence in higher-order beliefs – otherwise called eductive stability – when coordination is sequential, that is, when each agent of a given type fixes his own actions after observing the ones of earlier types in a given order. The presence of sequential types enhances expectational coordination in the case of strategic substitutability, but not in the case of strategic complementarity. In particular, eductive stability can be obtained for any degree of substitutability, provided the number of sequential types is large enough. Therefore, sequential coordination opens up to the possibility that eductive convergence occurs at the same conditions of adaptive convergence, in accordance to the E-stability principle.

Suggested Citation

  • Gaballo, Gaetano, 2014. "Sequential coordination, higher-order belief dynamics and the E-stability principle," Journal of Economic Dynamics and Control, Elsevier, vol. 44(C), pages 270-279.
  • Handle: RePEc:eee:dyncon:v:44:y:2014:i:c:p:270-279
    DOI: 10.1016/j.jedc.2014.04.011
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    References listed on IDEAS

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    1. Roger Guesnerie, 2005. "Assessing Rational Expectations 2: "Eductive" Stability in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072580, January.
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    More about this item

    Keywords

    Eductive learning; Rational expectation equilibria; Rationalizable set; Learning in macroeconomics; Coordination games;

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

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