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Strategic interactions, incomplete information and learning

  • Berardi, Michele

In a model of incomplete, heterogeneous information, with externalities and strategic interactions, we analyze the possibility for learning to act as coordination device. We build on the framework proposed by Angeletos and Pavan (2007) and extend it to a dynamic multiperiod setting where agents need to learn to coordinate. We analyze conditions under which adaptive and eductive learning obtain, and show that adaptive learning conditions are less demanding than the eductive ones: in particular, when actions are strategic substitutes, the equilibrium is always adaptively learnable, while it might not be eductively so. In case of heterogeneous preferences, moreover, convergence only depends on the average characteristic of agents in the economy. We also show that adaptive learning dynamics converge to the game theoretical strategic equilibrium, which means that agents can learn to act strategically in a simple and straightforward way.

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File URL: http://mpra.ub.uni-muenchen.de/38651/1/MPRA_paper_38651.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 38651.

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Date of creation: 06 May 2012
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Handle: RePEc:pra:mprapa:38651
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  1. Evans George W. & Guesnerie Roger, 1993. "Rationalizability, Strong Rationality, and Expectational Stability," Games and Economic Behavior, Elsevier, vol. 5(4), pages 632-646, October.
  2. Woodford, Michael, 1990. "Learning to Believe in Sunspots," Econometrica, Econometric Society, vol. 58(2), pages 277-307, March.
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  8. V. Crawford, 2010. "Adaptive Dynamics in Coordination Games," Levine's Working Paper Archive 404, David K. Levine.
  9. Joel Carton & Eran A. Guse, 2010. "Replicator Dynamic Learning in Muth's Model of Price Movements," Working Papers 10-18, Department of Economics, West Virginia University.
  10. Townsend, Robert M, 1983. "Forecasting the Forecasts of Others," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 546-88, August.
  11. George-Marios Angeletos & Christian Hellwig & Alessandro Pavan, 2007. "Dynamic Global Games of Regime Change: Learning, Multiplicity, and the Timing of Attacks," Econometrica, Econometric Society, vol. 75(3), pages 711-756, 05.
  12. Guesnerie, R., 1989. "An Exploration of the Eductive Justifications of the Rational Expectations Hypotbesis," DELTA Working Papers 89-24, DELTA (Ecole normale supérieure).
  13. Evans, George W. & Honkapohja, Seppo, 2003. "Expectational stability of stationary sunspot equilibria in a forward-looking linear model," Journal of Economic Dynamics and Control, Elsevier, vol. 28(1), pages 171-181, October.
  14. Stephen Morris & Hyun Song Shin, 2002. "Social Value of Public Information," American Economic Review, American Economic Association, vol. 92(5), pages 1521-1534, December.
  15. Beggs Alan, 2009. "Learning in Bayesian Games with Binary Actions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 9(1), pages 1-30, September.
  16. Cass, David & Shell, Karl, 1983. "Do Sunspots Matter?," Journal of Political Economy, University of Chicago Press, vol. 91(2), pages 193-227, April.
  17. Marcet, Albert & Sargent, Thomas J, 1989. "Convergence of Least-Squares Learning in Environments with Hidden State Variables and Private Information," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1306-22, December.
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