IDEAS home Printed from https://ideas.repec.org/p/arx/papers/2510.23951.html

Strategic Learning with Asymmetric Rationality

Author

Listed:
  • Qingmin Liu
  • Yuyang Miao

Abstract

This paper analyzes a dynamic interaction between a fully rational, privately informed sender and a boundedly rational, uninformed receiver with memory constraints. The sender controls the flow of information, while the receiver designs a decision-making protocol that uses a finite state space to learn and to provide incentives. We characterize optimal protocols and quantify the scope for manipulation and the incentive cost of guarding against it. We show that distinctive behavioral patterns that might otherwise appear erratic or psychologically driven -- such as information disengagement, opinion polarization conditional on the same information, and indecision near the decision point -- emerge as systematic equilibrium responses to asymmetric rationality and information. The model provides an expressive framework for procedural rationality in strategic settings.

Suggested Citation

  • Qingmin Liu & Yuyang Miao, 2025. "Strategic Learning with Asymmetric Rationality," Papers 2510.23951, arXiv.org, revised Nov 2025.
    • Handle: RePEc:arx:papers:2510.23951
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/2510.23951
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Lipman, Barton L, 1991. "How to Decide How to Decide How to. . . : Modeling Limited Rationality," Econometrica, Econometric Society, vol. 59(4), pages 1105-1125, July.
    2. Abreu, Dilip & Rubinstein, Ariel, 1988. "The Structure of Nash Equilibrium in Repeated Games with Finite Automata," Econometrica, Econometric Society, vol. 56(6), pages 1259-1281, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Conlisk, John, 1996. "Bounded rationality and market fluctuations," Journal of Economic Behavior & Organization, Elsevier, vol. 29(2), pages 233-250, March.
    2. Markus Pasche, 2001. "Equilibrium Concepts for Boundedly Rational Behavior in Games," Working Paper Series B 2001-03, Friedrich Schiller University of Jena, School of of Economics and Business Administration.
    3. Stennek, Johan, 1994. "Does Competition Make Firms More Flexible? A Study of Limited Managerial Cognition," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(2), pages 279-300, Summer.
    4. Ortoleva, Pietro, 2013. "The price of flexibility: Towards a theory of Thinking Aversion," Journal of Economic Theory, Elsevier, vol. 148(3), pages 903-934.
    5. David Baron & Ehud Kalai, 1990. "Dividing a Cake by Majority: The Simplest Equilibria," Discussion Papers 919, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    6. Philippe Jehiel, 2022. "Analogy-Based Expectation Equilibrium and Related Concepts:Theory, Applications, and Beyond," Working Papers halshs-03735680, HAL.
    7. Tracy Xiao Liu & Jenna Bednar & Yan Chen & Scott Page, 2019. "Directional behavioral spillover and cognitive load effects in multiple repeated games," Experimental Economics, Springer;Economic Science Association, vol. 22(3), pages 705-734, September.
    8. Jean-Luc Gaffard & Mauro Napoletano, 2012. "Agent-based models and economic policy," Post-Print hal-03461120, HAL.
    9. Samahita, Margaret & Holm, Håkan J., 2020. "Mining for Mood Effect in the Field," Working Papers 2020:2, Lund University, Department of Economics.
    10. Jehiel, Philippe, 1998. "Learning to Play Limited Forecast Equilibria," Games and Economic Behavior, Elsevier, vol. 22(2), pages 274-298, February.
    11. Prajit K. Dutta & Paolo Siconolfi, 2010. "Mixed strategy equilibria in repeated games with one‐period memory," International Journal of Economic Theory, The International Society for Economic Theory, vol. 6(1), pages 167-187, March.
    12. Van Damme, Eric, 1994. "Evolutionary game theory," European Economic Review, Elsevier, vol. 38(3-4), pages 847-858, April.
    13. Olivier Compte & Andrew Postlewaite, 2007. "Effecting Cooperation," PIER Working Paper Archive 09-019, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 29 May 2009.
    14. Rubinstein, A. & Wolnsky, A., 1992. "A Rermark on Infinitely Repeated Extensive Games," Papers 4-92, Tel Aviv - the Sackler Institute of Economic Studies.
    15. van Damme, E.E.C., 1995. "Game theory : The next stage," Other publications TiSEM 7779b0f9-bef5-45c7-ae6b-7, Tilburg University, School of Economics and Management.
    16. Daijiro Okada & Abraham Neyman, 2004. "Growing Strategy Sets in Repeated Games," Econometric Society 2004 North American Summer Meetings 625, Econometric Society.
    17. Jehiel, Philippe, 2005. "Analogy-based expectation equilibrium," Journal of Economic Theory, Elsevier, vol. 123(2), pages 81-104, August.
    18. Ho, Teck-Hua, 1996. "Finite automata play repeated prisoner's dilemma with information processing costs," Journal of Economic Dynamics and Control, Elsevier, vol. 20(1-3), pages 173-207.
    19. Benjamin Patrick Evans & Mikhail Prokopenko, 2021. "Bounded rationality for relaxing best response and mutual consistency: The Quantal Hierarchy model of decision-making," Papers 2106.15844, arXiv.org, revised Mar 2023.
    20. Christos A. Ioannou & Julian Romero, 2012. "Strategic Learning With Finite Automata Via The EWA-Lite Model," Purdue University Economics Working Papers 1269, Purdue University, Department of Economics.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:arx:papers:2510.23951. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.