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Online Concealed Correlation by Boundedly Rational Players

  • Gilad Bavly

    ()

  • Abraham Neyman

    ()

In a repeated game with perfect monitoring, correlation among a group of players may evolve in the common course of play (online correlation). Such a correlation may be concealed from a boundedly rational player. The feasibility of such “online concealed correlation” is quantified by the individually rational payoff of the boundedly rational player. We show that “strong” players, i.e., players whose strategic complexity is less stringently bounded, can orchestrate online correlation of the actions of “weak” players, in a manner that is concealed from an opponent of “intermediate” strength. The result is illustrated in two models, each captures another aspect of bounded rationality. In the first, players use bounded recall strategies. In the second, players use strategies that are implementable by finite automata.

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Paper provided by The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem in its series Discussion Paper Series with number dp336.

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Length: 36 pages
Date of creation: Sep 2003
Date of revision:
Handle: RePEc:huj:dispap:dp336
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  1. Lehrer, Ehud, 1988. "Repeated games with stationary bounded recall strategies," Journal of Economic Theory, Elsevier, vol. 46(1), pages 130-144, October.
  2. Gossner, Olivier & Tomala, Tristan, 2003. "Entropy and codification in repeated games with imperfect monitoring," Economics Papers from University Paris Dauphine 123456789/6885, Paris Dauphine University.
  3. O. Gossner, 1999. "Repeated games played by cryptographically sophisticated players," THEMA Working Papers 99-07, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  4. Itzhak Gilboa & David Schmeidler, 1989. "Infinite Histories and Steady Orbits in Repeated Games," Discussion Papers 846, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Ben-Porath Elchanan, 1993. "Repeated Games with Finite Automata," Journal of Economic Theory, Elsevier, vol. 59(1), pages 17-32, February.
  6. GOSSNER, Olivier & TOMALA, Tristan, 2003. "Entropy and codification in repeated games with imperfect monitoring," CORE Discussion Papers 2003033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  7. Olivier Gossner & Penelope Hernandez & Abraham Neyman, 2003. "Online Matching Pennies," Discussion Paper Series dp316, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  8. Ariel Rubinstein, 1997. "Finite automata play the repeated prisioners dilemma," Levine's Working Paper Archive 1639, David K. Levine.
  9. Neyman, Abraham, 1985. "Bounded complexity justifies cooperation in the finitely repeated prisoners' dilemma," Economics Letters, Elsevier, vol. 19(3), pages 227-229.
  10. Ehud Kalai, 1987. "Bounded Rationality and Strategic Complexity in Repeated Games," Discussion Papers 783, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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