Learning and Equilibrium

Fudenberg, Drew; Levine, David K.

doi:10.1146/annurev.economics.050708.142930

Cited by 83 publications

(58 citation statements)

References 126 publications

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“…Note that for this second interpretation, uniqueness is irrelevant; the initial conditions may determine at which equilibrium the process ends up. A large literature has investigated various types of learning processes and under which conditions convergence to equilibrium is indeed obtained; see Fudenberg and Levine (1998, 2009) and Young (2004 for overviews.…”

Section: Nash Equilibriummentioning

confidence: 99%

Game Theory: Noncooperative Games

Damme

2015

International Encyclopedia of the Social &Amp; Behavioral Sciences

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We describe noncooperative game models and discuss game theoretic solution concepts. Some applications are also noted. Conventional theory focuses on the question 'how will rational players play?', and has the Nash equilibrium at its core. We discuss this concept and its interpretations, as well as refinements (perfect and stable equilibria) and relaxations (rationalizability and correlated equilibria). Motivated by experiments that show systematic theory violations, behavioral game theory aims to integrate insights from psychology to get better answers to the question 'how do humans play?'. We provide an overview of the observed regularities and briefly sketch (beginnings of) theories of boundedly rational play.

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Section: Nash Equilibriummentioning

confidence: 99%

Game Theory: Noncooperative Games

Damme

2015

International Encyclopedia of the Social &Amp; Behavioral Sciences

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“…Agents are assumed to treat the empirical distribution of play as stationary in for example fictitious play (Fudenberg and Levine, 2009). Many models in which expectations are based on empirical frequencies of past play include an assumption similar to the second (e.g.…”

Section: A Model Of Communication In Weakest-link Gamesmentioning

confidence: 99%

Organizational Coordination and Costly Communication with Boundedly Rational Agents

Dietrichson¹,

Jochem

2014

SSRN Journal

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How does costly communication affect organizational coordination? This paper develops a model of costly communication based on the weakest-link game and boundedly rational agents. Solving for the stochastically stable states, we find that communication increases the possibilities for efficient coordination compared to a setting where agents cannot communicate. But as agents face a trade-off between lowering the strategic uncertainty for the group and the costs of communication, the least efficient state is still the unique stochastically stable one for many parameter values. Simulations show that this is not just a long run phenomena, the stochastically stable state is the most frequent outcome also in the short run. Making communication mandatory induces efficient coordination, whereas letting a team leader handle communication increases efficiency when the leader expects others to follow and has enough credibility. The results are broadly consistent with recent experimental evidence of communication in weakest-link games.

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“…Thus there is a spreading away from the initial income. This learning process generates randomness in the system [30]. The speed of spreading parameter is interpreted as depending on learning speed which is proportional to the mobility of factors of production.…”

Section: The Modelmentioning

confidence: 99%

On a Theme by Heckscher-Ohlin: A Diffusion Model for Spatial Dynamics in Factor Prices

Hashemi¹

2012

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An analytical study is presented for the cross-sectional distribution of factor prices over time and across space. A drift-diffusion model is proposed to describe the dynamic process governing the fluctuations around the equilibrium distribution. The model is mechanical and descriptive in nature, and illustrates that the growth distribution of factor prices can be generated by a single stochastic process that builds upon the theory of diffusion processes. An empirical application of the proposed model, to the evolution of the distribution of incomes for 186 countries, recorded from 1993 up to 2007, illustrates the applicability of the proposed method and suggests that diffusion may be a preferable technique for the analysis of the spatial dynamics in factor prices.Keywords: International Trade; Factor Price Equalization; Cross-Sectional Distribution of Factor Price; Diffusion Full AbstractThis paper presents an analytical study of the cross-sectional distribution of factor prices over time and across space. A methodology is proposed, which offers a novel representation for the Heckscher-Ohlin model and its key implications, including the Factor price equalization, the Stolper-Samuelson and the Rybczynski theorems. A driftdiffusion model is proposed to describe the dynamic process governing the fluctuations around the equilibrium distribution of factor price. The model is mechanical and descriptive in nature, and illustrates that the growth distribution of factor price can be generated by a single stochastic process that builds upon the theory of diffusion processes.The dynamics of the proposed model rely on two opposing flows: 1) a factor equalization process which is meant to concentrate the distribution, and 2) a counteracting diffusion process which is meant to describe noise thus flattening the distribution. One of the parameters entering into diffusion is motivated by random shocks. It is hypothesized that these flows follow simple evolutionary laws that can be described with five parametersparameters that can be estimated from historical data with some accuracy.An empirical application of the proposed model, to the evolution of the distribution of incomes for 186 countries, recorded from 1993 up to 2007, illustrates the applicability of the proposed method for studying income distribution dynamics, and suggests that diffusion may be a preferable technique for the analysis of spatial dynamics in factor prices.The question posed by this paper is an original one. While much attention has been given in the literature to the explanation of the shape of income distribution at a given point in time by reference to steady state arguments [1][2][3][4], the dynamics in question have been relatively ignored. The main objective of this paper is to contribute to our understanding of some determinants of the dynamic process governing the distribution of income, and build up a tractable structure for its analysis. This is achieved by deriving both the steady state distribution as well as the dynamic behavior of t...

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Learning and Equilibrium

Cited by 83 publications

References 126 publications

Game Theory: Noncooperative Games

Game Theory: Noncooperative Games

Organizational Coordination and Costly Communication with Boundedly Rational Agents

On a Theme by Heckscher-Ohlin: A Diffusion Model for Spatial Dynamics in Factor Prices

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