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Incentive constraints in games with bounded memory

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  • Daniel Monte

Abstract

In this paper I analyze a repeated coordination game between a bounded memory player and a fully rational player. A bounded memory player is a player who is subject to imperfect recall, but, conditional on this constraint, acts optimally every point in time given her beliefs over the actual history of the game. I show that the results contrast with the ones in the finite automata literature. In particular, a result denoted the “tyranny of the weak” in Gilboa and Samet (Games Econ Behav 1: 213–221, 1989 ) is no longer present here. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Daniel Monte, 2014. "Incentive constraints in games with bounded memory," International Journal of Game Theory, Springer;Game Theory Society, vol. 43(1), pages 137-143, February.
  • Handle: RePEc:spr:jogath:v:43:y:2014:i:1:p:137-143
    DOI: 10.1007/s00182-013-0376-8
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    References listed on IDEAS

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    1. Gilboa, Itzhak & Samet, Dov, 1989. "Bounded versus unbounded rationality: The tyranny of the weak," Games and Economic Behavior, Elsevier, vol. 1(3), pages 213-221, September.
    2. Lipman, Barton L., 1997. "More Absentmindedness," Games and Economic Behavior, Elsevier, vol. 20(1), pages 97-101, July.
    3. Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June.
    4. Aumann, Robert J., 1997. "Rationality and Bounded Rationality," Games and Economic Behavior, Elsevier, vol. 21(1-2), pages 2-14, October.
    5. Aumann, Robert J. & Hart, Sergiu & Perry, Motty, 1997. "The Absent-Minded Driver," Games and Economic Behavior, Elsevier, vol. 20(1), pages 102-116, July.
    6. Joel Sobel, 1985. "A Theory of Credibility," Review of Economic Studies, Oxford University Press, vol. 52(4), pages 557-573.
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    More about this item

    Keywords

    Bounded memory; Commitment; Automaton; C72; D82; D83;
    All these keywords.

    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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