Published in

Elsevier, Journal of Economic Theory, 2(123), p. 81-104, 2005

DOI: 10.1016/j.jet.2003.12.003

Elsevier, Journal of Economic Theory

DOI: 10.1016/s0022-0531(04)00025-0

Links

Tools

Export citation

Search in Google Scholar

Analogy-based expectation equilibrium

Journal article published in 2005 by Philippe Jehiel
This paper is available in a repository.
This paper is available in a repository.

Full text: Download

Green circle
Preprint: archiving allowed
Upload
Orange circle
Postprint: archiving restricted
Upload
Red circle
Published version: archiving forbidden
Policy details
Data provided by SHERPA/RoMEO

Abstract

In complex situations, agents use simplified representations to learn how their environment may react. I assume that agents bundle nodes at which other agents must move into analogy classes, and agents only try to learn the average behavior in every class. Specifically, I propose a new solution concept for multi-stage games with perfect information: at every node players choose best-responses to their analogy-based expectations, and expectations correctly represent the average behavior in every class. The solution concept is shown to differ from existing concepts, and it is applied to a variety of games, in particular the centipede game, and ultimatum/bargaining games. The approach explains in a new way why players may Pass for a large number of periods in the centipede game, and why the responder need not be stuck to his reservation value in ultimatum games. Some possible avenues for endogenizing the analogy grouping are also suggested.