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Learning to be prepared

  • Kets, Willemien

    (Department of Econometrics and Operations Research)

  • Voorneveld, Mark

    ()

    (Dept. of Economics, Stockholm School of Economics)

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).

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File URL: http://swopec.hhs.se/hastef/papers/hastef0590.pdf
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Paper provided by Stockholm School of Economics in its series SSE/EFI Working Paper Series in Economics and Finance with number 590.

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Length: 27 pages
Date of creation: 07 Mar 2005
Date of revision:
Handle: RePEc:hhs:hastef:0590
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  1. 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.
  2. Basu, K. & Weibull, J.W., 1990. "Strategy Subsets Closed Under Rational Behaviour," Papers 479, Stockholm - International Economic Studies.
  3. Allison, G. & Fudenberg, D., 1992. "Rules of Thumb for Social Learning," Working papers 92-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Tercieux, O.R.C. & Voorneveld, M., 2005. "The Cutting Power of Preparation," Discussion Paper 2005-94, Tilburg University, Center for Economic Research.
  5. Ehud Kalai & Dov Samet, 1982. "Persistent Equilibria in Strategic Games," Discussion Papers 515, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  6. Brigitte C. Madrian & Dennis F. Shea, 2000. "The Power of Suggestion: Inertia in 401(k) Participation and Savings Behavior," NBER Working Papers 7682, National Bureau of Economic Research, Inc.
  7. Voorneveld, Mark & Kets, Willemien & Norde, Henk, 2005. "An axiomatization of minimal curb sets," SSE/EFI Working Paper Series in Economics and Finance 589, Stockholm School of Economics, revised 18 Mar 2005.
  8. Grossman, Sanford J & Kihlstrom, Richard E & Mirman, Leonard J, 1977. "A Bayesian Approach to the Production of Information and Learning by Doing," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 533-47, October.
  9. Tercieux, Olivier & Voorneveld, Mark, 2005. "The cutting power of preparation," SSE/EFI Working Paper Series in Economics and Finance 583, Stockholm School of Economics.
  10. Hurkens Sjaak, 1995. "Learning by Forgetful Players," Games and Economic Behavior, Elsevier, vol. 11(2), pages 304-329, November.
  11. Drew Fudenberg & David K. Levine, 1998. "Learning in Games," Levine's Working Paper Archive 2222, David K. Levine.
  12. Sugden, Robert, 1995. "A Theory of Focal Points," Economic Journal, Royal Economic Society, vol. 105(430), pages 533-50, May.
  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. Voorneveld, Mark, 2004. "Preparation," Games and Economic Behavior, Elsevier, vol. 48(2), pages 403-414, August.
  15. Crawford, Vincent P & Haller, Hans, 1990. "Learning How to Cooperate: Optimal Play in Repeated Coordination Games," Econometrica, Econometric Society, vol. 58(3), pages 571-95, May.
  16. Vega-Redondo, Fernando, 1995. "The Dynamics and Revealed Preference of Status-Quo Optimality," Economic Theory, Springer, vol. 6(2), pages 263-82, July.
  17. Voorneveld, Mark, 2005. "Persistent retracts and preparation," Games and Economic Behavior, Elsevier, vol. 51(1), pages 228-232, April.
  18. Vega-Redondo, Fernando, 1993. "Simple and Inertial Behavior: An Optimizing Decision Model with Imprecise Perceptions," Economic Theory, Springer, vol. 3(1), pages 87-98, January.
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