On the Impossibility of Predicting the Behavior of Rational Agents
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 playersÕ strategy should be optimal given his or her prediction of the opponentsÕ strategies. We demonstrate that there is an inherent tension between rationality and prediction when players are uncertain about their opponentsÕ 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 playerÕs 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.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" 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.
|Date of creation:||Aug 2001|
|Date of revision:|
|Contact details of provider:|| Postal: 1399 Hyde Park Road, Santa Fe, New Mexico 87501|
Web page: http://www.santafe.edu/sfi/publications/working-papers.html
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ehud Kalai & Ehud Lehrer, 1990.
"Rational Learning Leads to Nash Equilibrium,"
895, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- E. Kalai & E. Lehrer, 2010. "Rational Learning Leads to Nash Equilibrium," Levine's Working Paper Archive 529, David K. Levine.
- Kalai, Ehud & Lehrer, Ehud, 1991. "Rational Learning Leads to Nash Equilibrium," Working Papers 91-18, C.V. Starr Center for Applied Economics, New York University.
- Ehud Kalai & Ehud Lehrer, 1990. "Rational Learning Leads to Nash Equilibrium," Discussion Papers 925, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- John Nachbar, 2010.
"Prediction, Optimization and Learning in Repeated Games,"
Levine's Working Paper Archive
576, David K. Levine.
- John H. Nachbar, 1997. "Prediction, Optimization, and Learning in Repeated Games," Econometrica, Econometric Society, vol. 65(2), pages 275-310, March.
- John H. Nachbar, 1995. "Prediction, Optimization, and Learning in Repeated Games," Game Theory and Information 9504001, EconWPA, revised 14 Feb 1996.
- Fudenberg Drew & Kreps David M., 1993.
"Learning Mixed Equilibria,"
Games and Economic Behavior,
Elsevier, vol. 5(3), pages 320-367, July.
- Ronald Miller & Chris Sanchirico, . "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.
- 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.
- 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.
- Jordan, J. S., 1991. "Bayesian learning in normal form games," Games and Economic Behavior, Elsevier, vol. 3(1), pages 60-81, February.
- Lehrer, Ehud & Smorodinsky, Rann, 1997. "Repeated Large Games with Incomplete Information," Games and Economic Behavior, Elsevier, vol. 18(1), pages 116-134, January.
- Jordan J. S., 1995. "Bayesian Learning in Repeated Games," Games and Economic Behavior, Elsevier, vol. 9(1), pages 8-20, April.
When requesting a correction, please mention this item's handle: RePEc:wop:safiwp:01-08-039. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.