International Journal of Game Theory

, Volume 37, Issue 3, pp 333–352 | Cite as

Learning to be prepared

Open Access
Original Paper

Abstract

Behavioral economics provides several motivations for the common observation that agents appear somewhat unwilling to deviate from recent choices. More recent choices can be more salient than other choices, or more readily available in the agent’s mind. Alternatively, agents may have formed habits, or use rules of thumb. This paper provides discrete-time adjustment processes for strategic games in which players display such a bias towards recent choices. In addition, players choose best replies to beliefs supported by observed play in the recent past. We characterize the limit behavior of these processes by showing that they eventually settle down in minimal prep sets (Voorneveld in Games Econ Behav 48:403–414, 2004).

Keywords

Adjustment Learning Minimal prep sets Availability bias Salience Rules of thumb 

JEL Classification

C72 D83 

References

  1. Basu K and Weibull JW (1991). Strategy subsets closed under rational behavior. Econ Lett 36: 141–146 CrossRefGoogle Scholar
  2. Crawford VP and Haller H (1990). Learning how to cooperate: optimal play in repeated coordination games. Econometrica 58: 571–595 CrossRefGoogle Scholar
  3. Ellison G and Fudenberg D (1993). Rules of thumb for social learning. J Polit Econ 101: 612–643 CrossRefGoogle Scholar
  4. Fudenberg D and Levine DK (1998). The theory of learning in games. MIT Press, Cambridge Google Scholar
  5. Grossman SJ, Kihlstrom RE and Mirman LJ (1977). A Bayesian approach to the production of information and learning by doing. Rev Econ Stud 44: 533–547 CrossRefGoogle Scholar
  6. Hurkens S (1995). Learning by forgetful players. Games Econ Behav 11: 304–329 CrossRefGoogle Scholar
  7. Joosten R, Peters H and Thuijsman F (1995). Unlearning by not doing: repeated games with vanishing actions. Games Econ Behav 9: 1–7 CrossRefGoogle Scholar
  8. Kalai E and Samet D (1984). Persistent equilibria in strategic games. Int J Game Theory 14: 41–50 CrossRefGoogle Scholar
  9. Kets W, Voorneveld M (2007) Congestion, equilibrium and learning: the minority game. CentER Discussion Paper 2007-61Google Scholar
  10. Madrian BC and Shea DF (2001). The power of suggestion: inertia in 401(k) participation and savings behavior. Quart J Econ 116: 1149–1187 CrossRefGoogle Scholar
  11. Miller N and Campbell DT (1959). Recency and primacy in persuasion as a function of the timing of speeches and measurements. J Abnormal Soc Psychol 59: 1–9 CrossRefGoogle Scholar
  12. Schelling T (1960). The strategy of conflict. Harvard University Press, Cambridge Google Scholar
  13. Tercieux O, Voorneveld M (2005) The cutting power of preparation. SSE/EFI Working paper series in Economics and Finance, No. 583, Stockholm School of EconomicsGoogle Scholar
  14. Tversky A and Kahneman D (1982). Judgment under uncertainty: heuristics and biases. In: Kahneman, D, Slovic, P and Tversky, A (eds) Judgment under uncertainty: heuristics and biases, pp 3–20. Cambridge University Press, Cambridge Google Scholar
  15. Vega-Redondo F (1993). Simple and inertial behavior: an optimizing decision model with imprecise perceptions. Econ Theory 3: 87–98 CrossRefGoogle Scholar
  16. Voorneveld M (2004). Preparation. Games Econ Behav 48: 403–414 CrossRefGoogle Scholar
  17. Voorneveld M (2005). Persistent retracts and preparation. Games Econ Behav 51: 228–232 CrossRefGoogle Scholar
  18. Voorneveld M, Kets W and Norde H (2005). An axiomatization of minimal curb sets. Int J Game Theory 33: 479–490 CrossRefGoogle Scholar
  19. Young HP (1998). Individual strategy and social structure. Princeton University Press, Princeton Google Scholar

Copyright information

© The Author(s) 2008

Authors and Affiliations

  1. 1.Department of Econometrics and Operations ResearchTilburg UniversityTilburgThe Netherlands
  2. 2.Department of EconomicsStockholm School of EconomicsStockholmSweden

Personalised recommendations