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When Aspiring and Rational Agents Strive to Coordinate

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  • Jaideep Roy

    (University of Copenhagen, Institute of Economics)

Abstract

The paper studies a game of common interest played infinitely many times between two players, one being aspiration driven while the other being a myopic optimizer. It is shown that the only two long run stationary outcomes are the two static equilibrium points. Robustness of long run behaviour is studied to show that whenever the optimizer is allowed to make small mistakes, players are able to coordinate on the Pareto dominant equilibrium point most of the time in the long run if the speed of evolution of aspirations is sufficiently fast. However, when only the aspiring player is allowed to make small mistakes, achieving coordination is inevitable and independent of the speed at which aspirations evolve.

Suggested Citation

  • Jaideep Roy, 2000. "When Aspiring and Rational Agents Strive to Coordinate," Discussion Papers 00-16, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:0016
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    File URL: http://www.econ.ku.dk/english/research/publications/wp/2000/0016.pdf/
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    References listed on IDEAS

    as
    1. Bendor, J. & Mookherjee, D. & Ray, D., 1994. "Aspirations, adaptive learning and cooperation in repeated games," Discussion Paper 1994-42, Tilburg University, Center for Economic Research.
    2. Amit Pazgal, 1995. "Satisficing Leads to Cooperation in Mutual Interests Games," Discussion Papers 1126, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Binmore, Ken & Samuelson, Larry, 1997. "Muddling Through: Noisy Equilibrium Selection," Journal of Economic Theory, Elsevier, vol. 74(2), pages 235-265, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    coordination; evolution of aspiration; myopic Optimization;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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