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Sequential Coordination, Higher-Order Belief Dynamics and E-Stability Principle

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  • G. Gaballo

Abstract

This paper explores convergence in higher-order beliefs - otherwise called eductive stability - when coordination is sequential, that is, when each agent of a given type fixes his own actions after observing the ones of earlier types in a given order. The presence of sequential types enhances expectational coordination in case of strategic substitutability, but not in case of strategic complementarity. In particular eductive stability can be obtained for any degree of substitutability, provided the number of sequential types is large enough. Therefore, sequential coordination opens up to the possibility that eductive convergence occurs at the same conditions of adaptive convergence, in accordance to the E-stability principle.

Suggested Citation

  • G. Gaballo, 2014. "Sequential Coordination, Higher-Order Belief Dynamics and E-Stability Principle," Working papers 509, Banque de France.
  • Handle: RePEc:bfr:banfra:509
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    References listed on IDEAS

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    1. Gaballo, Gaetano, 2013. "Eductive learning and the rationalizability of oligopoly games," Economics Letters, Elsevier, vol. 120(3), pages 401-404.
    2. Roger Guesnerie, 2005. "Assessing Rational Expectations 2: "Eductive" Stability in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072580, May.
    3. Lucas, Robert E, Jr, 1973. "Some International Evidence on Output-Inflation Tradeoffs," American Economic Review, American Economic Association, vol. 63(3), pages 326-334, June.
    4. Bernheim, B Douglas, 1984. "Rationalizable Strategic Behavior," Econometrica, Econometric Society, vol. 52(4), pages 1007-1028, July.
    5. George William Evans, 2001. "Expectations in Macroeconomics Adaptive versus Eductive Learning," Revue économique, Presses de Sciences-Po, vol. 52(3), pages 573-582.
    6. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521530927, October.
    7. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-1050, July.
    8. George Evans, 1985. "Expectational Stability and the Multiple Equilibria Problem in Linear Rational Expectations Models," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1217-1233.
    9. Chamley,Christophe P., 2004. "Rational Herds," Cambridge Books, Cambridge University Press, number 9780521824019, October.
    10. Bray, Margaret M & Savin, Nathan E, 1986. "Rational Expectations Equilibria, Learning, and Model Specification," Econometrica, Econometric Society, vol. 54(5), pages 1129-1160, September.
    11. Börgers, Tilman & Janssen, Maarten C.W., 1995. "On the dominance solvability of large cournot games," Games and Economic Behavior, Elsevier, vol. 8(2), pages 297-321.
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    More about this item

    Keywords

    eductive learning; rational expectation equilibria; rationalizable set; learning in macroeconomics; coordination games.;

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology

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