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Contagion through learning

Author

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  • Steiner, Jakub

    () (Economics, University of Edinburgh)

  • Stewart, Colin

    () (Department of Economics, University of Toronto)

Abstract

We study learning in a large class of complete information normal form games. Players continually face new strategic situations and must form beliefs by extrapolation from similar past situations. We characterize the long-run outcomes of learning in terms of iterated dominance in a related incomplete information game with subjective priors. The use of extrapolations in learning may generate contagion of actions across games even if players learn only from games with payoffs very close to the current ones. Contagion may lead to unique long-run outcomes where multiplicity would occur if players learned through repeatedly playing the same game. The process of contagion through learning is formally related to contagion in global games, although the outcomes generally differ.

Suggested Citation

  • Steiner, Jakub & Stewart, Colin, 2008. "Contagion through learning," Theoretical Economics, Econometric Society, vol. 3(4), December.
  • Handle: RePEc:the:publsh:416
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Rossella Argenziano & Itzhak Gilboa, 2012. "History as a coordination device," Theory and Decision, Springer, vol. 73(4), pages 501-512, October.
    2. Grimm, Veronika & Mengel, Friederike, 2012. "An experiment on learning in a multiple games environment," Journal of Economic Theory, Elsevier, vol. 147(6), pages 2220-2259.
    3. Christoph March, 2011. "Adaptive social learning," PSE Working Papers halshs-00572528, HAL.
    4. Mengel, Friederike, 2012. "Learning across games," Games and Economic Behavior, Elsevier, vol. 74(2), pages 601-619.
    5. repec:eee:gamebe:v:106:y:2017:i:c:p:209-226 is not listed on IDEAS
    6. Mohlin, Erik, 2014. "Optimal categorization," Journal of Economic Theory, Elsevier, vol. 152(C), pages 356-381.
    7. Wolfgang Kuhle, 2013. "A Global Game with Heterogenous Priors," Papers 1312.7860, arXiv.org.
    8. Daron Acemoglu & Matthew O. Jackson, 2015. "History, Expectations, and Leadership in the Evolution of Social Norms," Review of Economic Studies, Oxford University Press, vol. 82(2), pages 423-456.
    9. Eric J. Hoffmann & Tarun Sabarwal, 2017. "Equilibrium Existence in Global Games With General Payoff Structures," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 201702, University of Kansas, Department of Economics, revised Feb 2017.
    10. Jakub Steiner & Colin Stewart, 2012. "Price Distortions in High-Frequency Markets," Discussion Papers 1549, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. Mengel Friederike & Sciubba Emanuela, 2010. "Extrapolation in Games of Coordination and Dominance Solvable Games," Research Memorandum 034, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    12. Cason, Timothy N. & Savikhin, Anya C. & Sheremeta, Roman M., 2012. "Behavioral spillovers in coordination games," European Economic Review, Elsevier, vol. 56(2), pages 233-245.
    13. Wolfgang Kuhle, 2016. "A global game with heterogenous priors," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(2), pages 167-185, October.
    14. Alan Beggs, 2015. "Learning in Monotone Bayesian Games," Economics Series Working Papers 737, University of Oxford, Department of Economics.
    15. John Duffy & Dietmar Fehr, 2018. "Equilibrium selection in similar repeated games: experimental evidence on the role of precedents," Experimental Economics, Springer;Economic Science Association, vol. 21(3), pages 573-600, September.
    16. Mohlin, Erik, 2012. "Evolution of theories of mind," Games and Economic Behavior, Elsevier, vol. 75(1), pages 299-318.
    17. Mengel, Friederike & Sciubba, Emanuela, 2014. "Extrapolation and structural similarity in games," Economics Letters, Elsevier, vol. 125(3), pages 381-385.
    18. Steiner, Jakub & Stewart, Colin, 2015. "Price distortions under coarse reasoning with frequent trade," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 574-595.
    19. Sergei Izmalkov & Muhamet Yildiz, 2010. "Investor Sentiments," American Economic Journal: Microeconomics, American Economic Association, vol. 2(1), pages 21-38, February.
    20. Arifovic, Jasmina & Hua Jiang, Janet & Xu, Yiping, 2013. "Experimental evidence of bank runs as pure coordination failures," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2446-2465.

    More about this item

    Keywords

    Similarity; learning; contagion; case-based reasoning; global games;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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