IDEAS home Printed from https://ideas.repec.org/p/jhu/papers/423.html
   My bibliography  Save this paper

On the Impossibility of Predicting the Behavior of Rational Agents

Author

Listed:
  • Dean Foster
  • H Peyton Young

Abstract

A foundational assumption in economics is that people are rational -- they choose optimal plans of action given their predictions about future states of the world In games of strategy this means that each players?strategy should be optimal given his or her prediction of the opponents?strategies We demonstrate that there is an inherent tension between rationality and prediction when players are uncertain about their opponents?payoff functions Specifically there are games in which it is impossible for perfectly rational players to learn to predict the future behavior of their opponents (even approximately) no matter what learning rule they use The reason is that in trying to predict the next-period behavior of an opponent a rational player must take an action this period that the opponent can observe This observation may cause the opponent to alter his next-period behavior thus invalidating the first player�s prediction The resulting feedback loop has the property that in almost every time period someone predicts that his opponent has a non-negligible probability of choosing one action when in fact the opponent is certain to choose a different action We conclude that there are strategic situations where it is impossible in principle for perfectly rational agents to learn to predict the future behavior of other perfectly rational agents based solely on their observed actions

Suggested Citation

  • Dean Foster & H Peyton Young, 1999. "On the Impossibility of Predicting the Behavior of Rational Agents," Economics Working Paper Archive 423, The Johns Hopkins University,Department of Economics, revised Jun 2001.
  • Handle: RePEc:jhu:papers:423
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Fudenberg Drew & Kreps David M., 1993. "Learning Mixed Equilibria," Games and Economic Behavior, Elsevier, vol. 5(3), pages 320-367, July.
    2. Kalai, Ehud & Lehrer, Ehud, 1993. "Rational Learning Leads to Nash Equilibrium," Econometrica, Econometric Society, vol. 61(5), pages 1019-1045, September.
    3. Jordan, J. S., 1991. "Bayesian learning in normal form games," Games and Economic Behavior, Elsevier, vol. 3(1), pages 60-81, February.
    4. John H. Nachbar, 1997. "Prediction, Optimization, and Learning in Repeated Games," Econometrica, Econometric Society, vol. 65(2), pages 275-310, March.
    5. Lehrer, Ehud & Smorodinsky, Rann, 1997. "Repeated Large Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 18(1), pages 116-134, January.
    6. Jordan J. S., 1995. "Bayesian Learning in Repeated Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 8-20, April.
    7. John H. Nachbar, 2001. "Bayesian learning in repeated games of incomplete information," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 18(2), pages 303-326.
    8. Yaw Nyarko, 1998. "Bayesian learning and convergence to Nash equilibria without common priors," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 643-655.
    9. Ronald Miller & Chris Sanchirico, "undated". "Almost Everybody Disagrees Almost All the Time: The Genericity of Weakly Merging Nowhere," Scholarship at Penn Law upenn_wps-1001, University of Pennsylvania Law School.
    10. Monderer, Dov & Shapley, Lloyd S., 1996. "Fictitious Play Property for Games with Identical Interests," Journal of Economic Theory, Elsevier, vol. 68(1), pages 258-265, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Norman, Thomas W.L., 2022. "The possibility of Bayesian learning in repeated games," Games and Economic Behavior, Elsevier, vol. 136(C), pages 142-152.
    2. Al-Suwailem, Sami, 2014. "Complexity and endogenous instability," Research in International Business and Finance, Elsevier, vol. 30(C), pages 393-410.
    3. Foster, Dean P. & Young, H. Peyton, 2003. "Learning, hypothesis testing, and Nash equilibrium," Games and Economic Behavior, Elsevier, vol. 45(1), pages 73-96, October.
    4. Burkhard C. Schipper, 2022. "Strategic Teaching and Learning in Games," American Economic Journal: Microeconomics, American Economic Association, vol. 14(3), pages 321-352, August.
    5. Chernov, G. & Susin, I., 2019. "Models of learning in games: An overview," Journal of the New Economic Association, New Economic Association, vol. 44(4), pages 77-125.
    6. Levy, Yehuda John, 2015. "Limits to rational learning," Journal of Economic Theory, Elsevier, vol. 160(C), pages 1-23.
    7. Norman, Thomas W.L., 2015. "Learning, hypothesis testing, and rational-expectations equilibrium," Games and Economic Behavior, Elsevier, vol. 90(C), pages 93-105.
    8. Thomas Norman, 2012. "Almost-Rational Learning of Nash Equilibrium without Absolute Continuity," Economics Series Working Papers 602, University of Oxford, Department of Economics.
    9. Georges, Christophre, 2006. "Learning with misspecification in an artificial currency market," Journal of Economic Behavior & Organization, Elsevier, vol. 60(1), pages 70-84, May.
    10. H. Peyton Young, 2007. "The Possible and the Impossible in Multi-Agent Learning," Economics Series Working Papers 304, University of Oxford, Department of Economics.
    11. Dean P Foster & Peyton Young, 2006. "Regret Testing Leads to Nash Equilibrium," Levine's Working Paper Archive 784828000000000676, David K. Levine.
    12. Yakov Babichenko, 2010. "Completely Uncoupled Dynamics and Nash Equilibria," Discussion Paper Series dp529, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    13. Babichenko, Yakov, 2012. "Completely uncoupled dynamics and Nash equilibria," Games and Economic Behavior, Elsevier, vol. 76(1), pages 1-14.
    14. Thomas Norman, 2012. "Learning Within Rational-Expectations Equilibrium," Economics Series Working Papers 591, University of Oxford, Department of Economics.
    15. Young, H. Peyton, 2002. "On the limits to rational learning," European Economic Review, Elsevier, vol. 46(4-5), pages 791-799, May.
    16. Anke Gerber, "undated". "Learning in and about Games," IEW - Working Papers 234, Institute for Empirical Research in Economics - University of Zurich.
    17. Burkhard Schipper, 2015. "Strategic teaching and learning in games," Working Papers 151, University of California, Davis, Department of Economics.
    18. Jonathan Newton, 2018. "Evolutionary Game Theory: A Renaissance," Games, MDPI, vol. 9(2), pages 1-67, May.
    19. Sami Al-Suwailem, 2012. "Complexity and Endogenous Instability," ASSRU Discussion Papers 1203, ASSRU - Algorithmic Social Science Research Unit.
    20. Joshua M. Epstein & Ross A. Hammond, 2001. "Non-Explanatory Equilibria: An Extremely Simple Game With (Mostly) Unattainable Fixed Points," Working Papers 01-08-043, Santa Fe Institute.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Young, H. Peyton, 2002. "On the limits to rational learning," European Economic Review, Elsevier, vol. 46(4-5), pages 791-799, May.
    2. Levy, Yehuda John, 2015. "Limits to rational learning," Journal of Economic Theory, Elsevier, vol. 160(C), pages 1-23.
    3. John H. Nachbar, 2005. "Beliefs in Repeated Games," Econometrica, Econometric Society, vol. 73(2), pages 459-480, March.
    4. Jackson, Matthew O. & Kalai, Ehud, 1999. "Reputation versus Social Learning," Journal of Economic Theory, Elsevier, vol. 88(1), pages 40-59, September.
    5. Foster, Dean P. & Young, H. Peyton, 2003. "Learning, hypothesis testing, and Nash equilibrium," Games and Economic Behavior, Elsevier, vol. 45(1), pages 73-96, October.
    6. Yoo, Seung Han, 2014. "Learning a population distribution," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 188-201.
    7. Mario Gilli, 2002. "Rational Learning in Imperfect Monitoring Games," Working Papers 46, University of Milano-Bicocca, Department of Economics, revised Mar 2002.
    8. Burkhard C. Schipper, 2022. "Strategic Teaching and Learning in Games," American Economic Journal: Microeconomics, American Economic Association, vol. 14(3), pages 321-352, August.
    9. Sandroni, Alvaro & Smorodinsky, Rann, 2004. "Belief-based equilibrium," Games and Economic Behavior, Elsevier, vol. 47(1), pages 157-171, April.
    10. Matthew O. Jackson & Ehud Kalai, 1997. "False Reputation in a Society of Players," Discussion Papers 1184R, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    11. Anke Gerber, "undated". "Learning in and about Games," IEW - Working Papers 234, Institute for Empirical Research in Economics - University of Zurich.
    12. Nyarko, Y., 1998. "The Truth is in the Eye of the Beholder: or Equilibrium in Beliefs and Rational Learning in Games," Working Papers 98-12, C.V. Starr Center for Applied Economics, New York University.
    13. Burkhard Schipper, 2015. "Strategic teaching and learning in games," Working Papers 151, University of California, Davis, Department of Economics.
    14. Anthonisen, Niels, 1997. "On the Convergence of Beliefs within Populations in Games with Learning," Journal of Economic Theory, Elsevier, vol. 76(1), pages 169-184, September.
    15. Hopkins, Ed, 1999. "Learning, Matching, and Aggregation," Games and Economic Behavior, Elsevier, vol. 26(1), pages 79-110, January.
    16. Jehiel, Philippe, 1998. "Learning to Play Limited Forecast Equilibria," Games and Economic Behavior, Elsevier, vol. 22(2), pages 274-298, February.
    17. Sobel, Joel, 2000. "Economists' Models of Learning," Journal of Economic Theory, Elsevier, vol. 94(2), pages 241-261, October.
    18. Matthew Jackson & Ehud Kalai, 1995. "Recurring Bullies," Discussion Papers 1151, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    19. Aoyagi, Masaki, 1998. "Mutual Observability and the Convergence of Actions in a Multi-Person Two-Armed Bandit Model," Journal of Economic Theory, Elsevier, vol. 82(2), pages 405-424, October.
    20. Jacques Durieu & Philippe Solal, 2012. "Models of Adaptive Learning in Game Theory," Chapters, in: Richard Arena & Agnès Festré & Nathalie Lazaric (ed.), Handbook of Knowledge and Economics, chapter 11, Edward Elgar Publishing.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jhu:papers:423. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Humphrey Muturi (email available below). General contact details of provider: https://edirc.repec.org/data/dejhuus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.