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Revisiting Games of Incomplete Information with Analogy-Based Expectations

  • Philippe Jehiel
  • Frederic Koessler


    (THEMA, Université de Cergy-Pontoise)

This paper studies the effects of analogy-based expectations in static two-player games of incomplete information. Players are assumed to be boundedly rational in the way they forecast their opponent's state-contingent strategy: they bundle states into analogy classes and play best-responses to their opponent's average strategy in those analogy classes. We provide general properties of analogy-based expectation equilibria and apply the model to a variety of well known games. We characterize conditions on the analogy partitions for successful coordination in coordination games under incomplete information [Rubinstein, A., 1989. The electronic mail game: Strategic behavior under 'almost common knowledge'. Amer. Econ. Rev. 79, 385-391], we show how analogy grouping of the receiver may facilitate information transmission in Crawford and Sobel's cheap talk games [Crawford, V.P., Sobel, J., 1982. Strategic information transmission. Econometrica 50, 1431-1451], and we show how analogy grouping may give rise to betting in zero-sum betting games such as those studied to illustrate the no trade theorem.

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Paper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2005-04.

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Date of creation: Jan 2005
Date of revision:
Handle: RePEc:ema:worpap:2005-04
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  1. Dekel, Eddie & Fudenberg, Drew & Levine, David, 2004. "Learning to Play Bayesian Games," Scholarly Articles 3200612, Harvard University Department of Economics.
  2. Milgrom, Paul & Stokey, Nancy, 1982. "Information, trade and common knowledge," Journal of Economic Theory, Elsevier, vol. 26(1), pages 17-27, February.
  3. Eyster, Erik & Rabin, Matthew, 2002. "Cursed Equilibrium," Department of Economics, Working Paper Series qt7p2911dn, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  4. Carlsson, H. & van Damme, E.E.C., 1993. "Global games and equilibrium selection," Other publications TiSEM 49a54f00-dcec-4fc1-9488-4, Tilburg University, School of Economics and Management.
  5. Morgan, J. & Stocken, P., 1998. "An Analysis of Stock Recommendations," Papers 204, Princeton, Woodrow Wilson School - Public and International Affairs.
  6. Dirk Bergemann & Stephen Morris, 2003. "Robust Mechanism Design," Cowles Foundation Discussion Papers 1421R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2004.
  7. Philippe Jehiel, 2005. "Analogy-based Expectation Equilibrium," Post-Print halshs-00754070, HAL.
  8. Jackson, Matthew O. & Kalai, Ehud, 1997. "Social Learning in Recurring Games," Games and Economic Behavior, Elsevier, vol. 21(1-2), pages 102-134, October.
  9. Rubinstein, Ariel, 1989. "The Electronic Mail Game: Strategic Behavior under "Almost Common Knowledge."," American Economic Review, American Economic Association, vol. 79(3), pages 385-91, June.
  10. Ignacio Esponda, 2008. "Behavioral Equilibrium in Economies with Adverse Selection," American Economic Review, American Economic Association, vol. 98(4), pages 1269-91, September.
  11. AUMANN, Robert J., . "Subjectivity and correlation in randomized strategies," CORE Discussion Papers RP 167, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  12. Philippe Jehiel & Steffen Huck & Tom Rutter, 2007. "Learning Spillover and Analogy-based Expectations: a Multi-Game Experiment," Levine's Bibliography 843644000000000120, UCLA Department of Economics.
  13. repec:tpr:qjecon:v:84:y:1970:i:3:p:488-500 is not listed on IDEAS
  14. Morris, Stephen & Postlewaite, Andrew & Shin, Hyun Song, 1995. "Depth of Knowledge and the Effect of Higher Order Uncertainty," Economic Theory, Springer, vol. 6(3), pages 453-67, November.
  15. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  16. Marco Ottaviani & Francesco Squintani, 2002. "Non-Fully Strategic Information Transmission," Wallis Working Papers WP29, University of Rochester - Wallis Institute of Political Economy.
  17. Andreas Blume & Oliver Board & Kohei Kawamura, 2007. "Noisy Talk," ESE Discussion Papers 167, Edinburgh School of Economics, University of Edinburgh.
  18. Stephen Morris & Hyun Song Shin, . "Approximate Common Knowledge and Co-ordination: Recent Lessons from Game Theory," Penn CARESS Working Papers 72042421d029130510780dde2, Penn Economics Department.
  19. Kartik, Navin & Ottaviani, Marco & Squintani, Francesco, 2007. "Credulity, lies, and costly talk," Journal of Economic Theory, Elsevier, vol. 134(1), pages 93-116, May.
  20. Krishna, Vijay & Morgan, John, 2004. "The art of conversation: eliciting information from experts through multi-stage communication," Journal of Economic Theory, Elsevier, vol. 117(2), pages 147-179, August.
  21. Samuelson, William F, 1984. "Bargaining under Asymmetric Information," Econometrica, Econometric Society, vol. 52(4), pages 995-1005, July.
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