Contagion through learning

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Contagion through learning

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,: Economics, University of Edinburgh
,: Department of Economics, University of Toronto
Authors registered in the RePEc Author Service: Colin Stewart and Jakub Steiner

Theoretical Economics, 2008, vol. 3, issue 4

Abstract: We study learning in a large class of complete information normal form games. Players continually face new strategic situations and must form beliefs by extrapolation from similar past situations. We characterize the long-run outcomes of learning in terms of iterated dominance in a related incomplete information game with subjective priors. The use of extrapolations in learning may generate contagion of actions across games even if players learn only from games with payoffs very close to the current ones. Contagion may lead to unique long-run outcomes where multiplicity would occur if players learned through repeatedly playing the same game. The process of contagion through learning is formally related to contagion in global games, although the outcomes generally differ.

Keywords: Similarity; learning; contagion; case-based reasoning; global games (search for similar items in EconPapers)
JEL-codes: C7 D8 (search for similar items in EconPapers)
Date: 2008-12-01
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Citations: View citations in EconPapers (38)

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Working Paper: Contagion through Learning (2007)
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