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A Necessary and Sufficient Condition for Convergence of Statistical to Strategic Equilibria of Market Games

Author

Listed:
  • Dimitrios P Tsomocos
  • Dimitris Voliotis
  • University of Athens and Council of Economic Advisers
  • Hellenic Ministry of Economy and Finance

Abstract

In our model, we treat a market game where traders are heterogeneous not only with respect to their rationality level but also with the formation of their subjective beliefs for the strategy of their opponents. Under these conditions, the market mechanism results a statistical equilibrium, where traders randomise among their available actions due to their limited rationality. Here, we provide a necessary and sufficient condition for convergence of statistical to strategic equilibria of market games, when traders become more informed and increasingly rational.

Suggested Citation

  • Dimitrios P Tsomocos & Dimitris Voliotis & University of Athens and Council of Economic Advisers & Hellenic Ministry of Economy and Finance, 2005. "A Necessary and Sufficient Condition for Convergence of Statistical to Strategic Equilibria of Market Games," Economics Series Working Papers 2005-FE-14, University of Oxford, Department of Economics.
    • Handle: RePEc:oxf:wpaper:2005-fe-14
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    Keywords

    Market games; Bounded rationality; Rational learning;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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