Learning and Equilibrium

Drew Fudenberg and David Levine

Annual Review of Economics, 2009, vol. 1, issue 1, 385-420

Abstract: The theory of learning in games explores how, which, and what kind of equilibria might arise as a consequence of a long-run nonequilibrium process of learning, adaptation, and/or imitation. If agents’ strategies are completely observed at the end of each round (and agents are randomly matched with a series of anonymous opponents), fairly simple rules perform well in terms of the agent’s worst-case payoffs, and also guarantee that any steady state of the system must correspond to an equilibrium. If players do not observe the strategies chosen by their opponents (as in extensive-form games), then learning is consistent with steady states that are not Nash equilibria because players can maintain incorrect beliefs about off-path play. Beliefs can also be incorrect because of cognitive limitations and systematic inferential errors.

Keywords: nonequilibrium dynamics; bounded rationality; Nash equilibrium; self-confirming equilibrium (search for similar items in EconPapers)
JEL-codes: C72 C73 D83 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (33)

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