Testing the TASP: An Experimental Investigation of Learning in Games with Unstable Equilibria

Timothy Cason (), Daniel Friedman () and Ed Hopkins ()
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Ed Hopkins: http://homepages.ed.ac.uk/hopkinse/

ESE Discussion Papers from Edinburgh School of Economics, University of Edinburgh

Abstract: We report experiments designed to test between Nash equilibria that are stable and unstable under learning. The “TASP” (Time Average of the Shapley Polygon) gives a precise prediction about what happens when there is divergence from equilibrium under fictitious play like learning processes. We use two 4 x 4 games each with a unique mixed Nash equilibrium; one is stable and one is unstable under learning. Both games are versions of Rock-Paper-Scissors with the addition of a fourth strategy, Dumb. Nash equilibrium places a weight of 1/2 on Dumb in both games, but the TASP places no weight on Dumb when the equilibrium is unstable. We also vary the level of monetary payoffs with higher payoffs predicted to increase instability. We find that the high payoff unstable treatment differs from the others. Frequency of Dumb is lower and play is further from Nash than in the other treatments. That is, we find support for the comparative statics prediction of learning theory, although the frequency of Dumb is substantially greater than zero in the unstable treatments.

Keywords: games; experiments; TASP; learning; unstable; mixed equilibrium; fictitious play. (search for similar items in EconPapers)
JEL-codes: C72 C73 C92 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-exp and nep-gth
Date: 2009-03-16
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Persistent link: http://EconPapers.repec.org/RePEc:edn:esedps:188

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