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Learning to be prepared

Author

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  • Kets, Willemien

    (Department of Econometrics and Operations Research)

  • Voorneveld, Mark

    () (Dept. of Economics, Stockholm School of Economics)

Abstract

Behavioral economics provides several motivations for the common observation that agents appear somewhat unwilling to deviate from recent choices: salience, inertia, the formation of habits, the use of rules of thumb, or the locking in on certain modes of behavior due to learning by doing. This paper provides discrete-time adjustment processes for strategic games in which players display precisely such a bias towards recent choices. In addition, players choose best replies to beliefs supported by observed play in the recent past, in line with much of the literature on learning. These processes eventually settle down in the minimal prep sets of Voorneveld (2004, 2005).

Suggested Citation

  • Kets, Willemien & Voorneveld, Mark, 2005. "Learning to be prepared," SSE/EFI Working Paper Series in Economics and Finance 590, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0590
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    References listed on IDEAS

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    1. Fudenberg, Drew & Levine, David, 1998. "Learning in games," European Economic Review, Elsevier, vol. 42(3-5), pages 631-639, May.
    2. Sanford J. Grossman & Richard E. Kihlstrom & Leonard J. Mirman, 1977. "A Bayesian Approach to the Production of Information and Learning By Doing," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 533-547.
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    4. Mark Voorneveld & Willemien Kets & Henk Norde, 2006. "An Axiomatization of Minimal Curb Sets," International Journal of Game Theory, Springer;Game Theory Society, vol. 34(1), pages 153-153, April.
    5. Olivier Tercieux & Mark Voorneveld, 2010. "The cutting power of preparation," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 71(1), pages 85-101, February.
    6. Sugden, Robert, 1995. "A Theory of Focal Points," Economic Journal, Royal Economic Society, vol. 105(430), pages 533-550, May.
    7. Voorneveld, Mark, 2004. "Preparation," Games and Economic Behavior, Elsevier, vol. 48(2), pages 403-414, August.
    8. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 612-643, August.
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    10. Joosten Reinoud & Peters Hans & Thuijsman Frank, 1995. "Unlearning by Not Doing: Repeated Games with Vanishing Actions," Games and Economic Behavior, Elsevier, vol. 9(1), pages 1-7, April.
    11. Ehud Kalai & Dov Samet, 1982. "Persistent Equilibria in Strategic Games," Discussion Papers 515, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    12. Brigitte C. Madrian & Dennis F. Shea, 2001. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1149-1187.
    13. Milgrom, Paul & Roberts, John, 1991. "Adaptive and sophisticated learning in normal form games," Games and Economic Behavior, Elsevier, vol. 3(1), pages 82-100, February.
    14. Vega-Redondo, Fernando, 1995. "The Dynamics and Revealed Preference of Status-Quo Optimality," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 6(2), pages 263-282, July.
    15. Voorneveld, Mark, 2005. "Persistent retracts and preparation," Games and Economic Behavior, Elsevier, vol. 51(1), pages 228-232, April.
    16. Vega-Redondo, Fernando, 1993. "Simple and Inertial Behavior: An Optimizing Decision Model with Imprecise Perceptions," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 3(1), pages 87-98, January.
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    Citations

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    Cited by:

    1. Kets, W., 2008. "Networks and learning in game theory," Other publications TiSEM 7713fce1-3131-498c-8c6f-3, Tilburg University, School of Economics and Management.
    2. repec:spr:compst:v:71:y:2010:i:1:p:85-101 is not listed on IDEAS
    3. Kuzmics, Christoph & Balkenborg, Dieter & Hofbauer, Josef, 2013. "Refined best-response correspondence and dynamics," Theoretical Economics, Econometric Society, vol. 8(1), January.
    4. Olivier Tercieux & Mark Voorneveld, 2010. "The cutting power of preparation," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 71(1), pages 85-101, February.
    5. Gilles Grandjean & Ana Mauleon & Vincent Vannetelbosch, 2017. "Strongly rational sets for normal-form games," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 5(1), pages 35-46, April.
    6. Balkenborg, Dieter & Hofbauer, Josef & Kuzmics, Christoph, 2016. "Refined best reply correspondence and dynamics," Center for Mathematical Economics Working Papers 451, Center for Mathematical Economics, Bielefeld University.

    More about this item

    Keywords

    adjustment; learning; minimal prep sets; behavioral bias; salience;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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