Dynamic Games under Bounded Rationality

Guo Zhao

MPRA Paper from University Library of Munich, Germany

Abstract: I propose a dynamic game model that is consistent with the paradigm of bounded rationality. Its main advantages over the traditional approach based on perfect rationality are that: (1) the strategy space is a chain-complete partially ordered set; (2) the response function is certain order-preserving map on strategy space; (3) the evolution of economic system can be described by the Dynamical System defined by the response function under iteration; (4) the existence of pure-strategy Nash equilibria can be guaranteed by fixed point theorems for ordered structures, rather than topological structures. This preference-response framework liberates economics from the utility concept, and constitutes a marriage of normal-form and extensive-form games.

Keywords: Dynamic Games; Bounded Rationality; Dynamical System; fixed point theorems; chain-complete partially ordered set; Coase theorem; impossibility theorem; Keynesian beauty contest; Bertrand Paradox; backward induction paradox (search for similar items in EconPapers)
JEL-codes: C7 D5 D7 (search for similar items in EconPapers)
Date: 2015-03-08
New Economics Papers: this item is included in nep-evo, nep-gth, nep-hpe, nep-mic and nep-upt
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https://mpra.ub.uni-muenchen.de/66140/1/MPRA_paper_66140.pdf revised version (application/pdf)

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