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Equilibrium Concepts for Boundedly Rational Behavior in Games

Author

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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-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.
  • Handle: RePEc:jen:jenavo:2001-03
    as

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    References listed on IDEAS

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    1. Camerer, Colin, "undated". "Progress and Behavioral Game Theory," Working Papers 1004, California Institute of Technology, Division of the Humanities and Social Sciences.
    2. Rosenthal, Robert W, 1989. "A Bounded-Rationality Approach to the Study of Noncooperative Games," International Journal of Game Theory, Springer;Game Theory Society, vol. 18(3), pages 273-291.
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    8. Schoemaker, Paul J. H., 1991. "Choices involving uncertain probabilities : Tests of generalized utility models," Journal of Economic Behavior & Organization, Elsevier, vol. 16(3), pages 295-317, December.
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    19. Markus Pasche, 2002. "Heterogeneous Behavioral Rules in the Oligopolistic Case," Working Paper Series B 2002-01, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.
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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-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.
    2. Markus Pasche, 2002. "Playing Fair: Rationality and Norm-guided Behavior in Games," Working Paper Series B 2002-02, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.

    More about this item

    Keywords

    Nash equilibrium; behavioral profiles; heterogenity; bounded rationality;

    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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