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Equilibrium Concepts for Boundedly Rational Behavior in Games

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  • Markus Pasche

    (University of Jena, Faculty of Economics)

Abstract

The paper extends the Nash equilibrium concept to account for arbitrary behavioral heuristics. Players are allowed not only to choose strategies, but also to select behavioral rules how to choose strategies. It is argued that behavioral profiles are in equilibrium if no player can benefit from deviating to another strategy, another behavioral rule or its parametrization. It turns out that in general payoff maximization is not a dominant behavioral rule. Furthermore it is shown that heterogeneous behavior may endogeneously evolve even in case of a unique symmetric Nash equilibrium.

Suggested Citation

  • Markus Pasche, 2001. "Equilibrium Concepts for Boundedly Rational Behavior in Games," Working Paper Series B 2001-03, Friedrich Schiller University of Jena, School of of Economics and Business Administration.
    • Handle: RePEc:jen:jenavo:2001-03
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    References listed on IDEAS

    as
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    18. Markus Pasche, 2002. "Heterogeneous Behavioral Rules in the Oligopolistic Case," Working Paper Series B 2002-01, Friedrich Schiller University of Jena, School of of Economics and Business Administration.
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    Citations

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    Cited by:

    1. Markus Pasche, 2002. "Heterogeneous Behavioral Rules in the Oligopolistic Case," Working Paper Series B 2002-01, Friedrich Schiller University of Jena, School of of Economics and Business Administration.
    2. Markus Pasche, 2002. "Playing Fair: Rationality and Norm-guided Behavior in Games," Working Paper Series B 2002-02, Friedrich Schiller University of Jena, School of of Economics and Business Administration.

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    More about this item

    Keywords

    Nash equilibrium; behavioral profiles; heterogenity; bounded rationality;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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