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Learning by Similarity in Coordination Problems

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  • Jakub Steiner
  • Colin Stewart

Abstract

We study a learning process in which subjects extrapolate from their experience of similar past strategic situations to the current decision problem. When applied to coordination games, this learning process leads to contagion of behavior from problems with extreme payoffs and unique equilibria to very dissimilar problems. In the long-run, contagion results in unique behavior even though there are multiple equilibria when the games are analyzed in isolation. Characterization of the long-run state is based on a formal parallel to rational equilibria of games with subjective priors. The results of contagion due to learning share the qualitative features of those from contagion due to incomplete information, but quantitatively they differ.

Suggested Citation

  • Jakub Steiner & Colin Stewart, 2007. "Learning by Similarity in Coordination Problems," CERGE-EI Working Papers wp324, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
  • Handle: RePEc:cer:papers:wp324
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    File URL: http://www.cerge-ei.cz/pdf/wp/Wp324.pdf
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    References listed on IDEAS

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    1. Jehiel, Philippe & Koessler, Frédéric, 2008. "Revisiting games of incomplete information with analogy-based expectations," Games and Economic Behavior, Elsevier, vol. 62(2), pages 533-557, March.
    2. Beggs Alan, 2009. "Learning in Bayesian Games with Binary Actions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-30, September.
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    6. Rossella Argenziano & Itzhak Gilboa, 2012. "History as a coordination device," Theory and Decision, Springer, vol. 73(4), pages 501-512, October.
    7. Gilboa,Itzhak & Schmeidler,David, 2001. "A Theory of Case-Based Decisions," Cambridge Books, Cambridge University Press, number 9780521802345, April.
    8. Milgrom, Paul & Roberts, John, 1990. "Rationalizability, Learning, and Equilibrium in Games with Strategic Complementarities," Econometrica, Econometric Society, vol. 58(6), pages 1255-1277, November.
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    12. Frank Heinemann & Rosemarie Nagel & Peter Ockenfels, 2004. "The Theory of Global Games on Test: Experimental Analysis of Coordination Games with Public and Private Information," Econometrica, Econometric Society, vol. 72(5), pages 1583-1599, September.
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    Cited by:

    1. Beggs Alan, 2009. "Learning in Bayesian Games with Binary Actions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-30, September.
    2. Jehiel, Philippe & Samet, Dov, 2007. "Valuation equilibrium," Theoretical Economics, Econometric Society, vol. 2(2), June.
    3. 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.
    4. Steiner, Jakub & Stewart, Colin, 2008. "Contagion through learning," Theoretical Economics, Econometric Society, vol. 3(4), December.
    5. Alan Beggs, 2015. "Learning in Monotone Bayesian Games," Economics Series Working Papers 737, University of Oxford, Department of Economics.

    More about this item

    Keywords

    Similarity; learning; contagion; case-based reasoning; global games; coordination; subjective priors.;

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