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Learning to Coordinate whit Heterogeneous Belief-Formation

Author

Listed:
  • Takako FUJIWARA-GREVE

    (Keio University Norvegian School of Management BI)

  • Carsten Krabbe NIELSEN

    (Universita' Cattolica di Milano)

Abstract

Experiments show that players with identical information and objectives have heterogeneous behavior rules. We formulate how different beliefs arise from the same information and analyze how heterogeneous belief formation affects learning outcomes of two-person two-action coordination games. With heterogeneous belief formation, it is possible to generate enough diversity in actions for eventual coordination, which is impossible under the ordinary adaptive learning model. When each player uses the same function to compute a belief over time, diversity of belief formation functions within or across populations is suffcient for convergence to coordination. When players choose belief-formation functions as well as actions over time, diverse adjustment of belief-formation functions is suffcient. A risk-dominant equilibrium is more likely to emerge than a payoff-dominant equilibrium since the former is more likely to be predicted by the players.

Suggested Citation

  • Takako FUJIWARA-GREVE & Carsten Krabbe NIELSEN, 2005. "Learning to Coordinate whit Heterogeneous Belief-Formation," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 113(3), pages 413-437.
  • Handle: RePEc:vep:journl:y:2005:v:113:i:3:p:413-437
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    More about this item

    Keywords

    learning; forward looking; coordination game; diversity in belief formation; equilibrium selection;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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