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Learning with bounded memory in games


  • Monte, Daniel


We study learning with bounded memory in zero-sum repeated games with one-sided incomplete information. The uninformed player has only a fixed number of memory states available. His strategy is to choose a transition rule from state to state, and an action rule, which is a map from each memory state to the set of actions. We show that the equilibrium transition rule involves randomization only in the intermediate memory states. Such randomization, or less frequent updating, is interpreted as a way of testing the opponent, which generates inertia in the player's behavior and is the main short-run bias in information processing exhibited by the bounded memory player.

Suggested Citation

  • Monte, Daniel, 2014. "Learning with bounded memory in games," Games and Economic Behavior, Elsevier, vol. 87(C), pages 204-223.
  • Handle: RePEc:eee:gamebe:v:87:y:2014:i:c:p:204-223
    DOI: 10.1016/j.geb.2014.03.005

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    References listed on IDEAS

    1. Piccione, Michele & Rubinstein, Ariel, 1997. "On the Interpretation of Decision Problems with Imperfect Recall," Games and Economic Behavior, Elsevier, vol. 20(1), pages 3-24, July.
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    4. Neyman, Abraham, 1985. "Bounded complexity justifies cooperation in the finitely repeated prisoners' dilemma," Economics Letters, Elsevier, vol. 19(3), pages 227-229.
    5. Monte, Daniel, 2013. "Bounded memory and permanent reputations," Journal of Mathematical Economics, Elsevier, vol. 49(5), pages 345-354.
    6. Kalai, Ehud & Stanford, William, 1988. "Finite Rationality and Interpersonal Complexity in Repeated Games," Econometrica, Econometric Society, vol. 56(2), pages 397-410, March.
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    Cited by:

    1. Brocas, Isabelle & Carrillo, Juan D., 2016. "A neuroeconomic theory of memory retrieval," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 198-205.
    2. Daniel Monte & Maher Said, 2014. "The value of (bounded) memory in a changing world," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 56(1), pages 59-82, May.

    More about this item


    Bounded memory; Incomplete information games; Repeated games;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness


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