| By: |
Jakub Steiner;
Colin Stewart |
| Abstract: |
We study a learning process in which subjects extrapolate from their
experience of similar past strategic situations to the current decision
problem. When applied to coordination games, this learning process leads to
contagion of behavior from problems with extreme payoffs and unique equilibria
to very dissimilar problems. In the long-run, contagion results in unique
behavior even though there are multiple equilibria when the games are analyzed
in isolation. Characterization of the long-run state is based on a formal
parallel to rational equilibria of games with subjective priors. The results
of contagion due to learning share the qualitative features of those from
contagion due to incomplete information, but quantitatively they differ. |
| Keywords: |
Similarity, learning, contagion, case-based reasoning, global games, coordination, subjective priors. |
| Date: |
2007–04 |
| URL: |
http://d.repec.org/n?u=RePEc:cer:papers:wp324&r=evo |