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Paying attention to payoffs in analogy-based learning

  • Topi Miettinen

    ()

This paper introduces the payoff-confirming analogy-based expectation equilibrium (PCABEE) as a way to refine the set of analogy-based equilibria and the associated admissible analogy partitions. In addition to the actions of others, own payoff history provides information about others’ strategies but, yet, non-Bayesian Nash equilibria may exist both with an incorrect and a correct prior. We provide general conditions when this happens. Two stylized employer-employee interactions, one with a correct and one with an incorrect prior, are provided illustrating how PCABEE can be used to analyze robust stereotypes and how incorrect such stereotypes may lead to discrimination.

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File URL: http://hdl.handle.net/10.1007/s00199-010-0565-7
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 50 (2012)
Issue (Month): 1 (May)
Pages: 193-222

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Handle: RePEc:spr:joecth:v:50:y:2012:i:1:p:193-222
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