Learning from inferred foregone payoffs

Hang Wu () and Ralph-C Bayer ()

Journal of Economic Dynamics and Control, 2015, vol. 51, issue C, 445-458

Abstract: A player׳s knowledge of her own actions and the corresponding payoffs may enable her to infer or form beliefs about what the payoffs would have been if she had played differently. For quantitative learning models employed in studies of low information environments, players׳ ex-post inferences and beliefs have been largely ignored. For games with large strategy spaces, this omission can seriously weaken the predictive power of a learning model. We propose a novel method of using players׳ ex-post inferences and assessments to impute foregone payoffs for unplayed strategies in low-information environments. We then use the resulting learning model to explain the pricing and learning behavior observed in a Bertrand market experiment. Maximum likelihood estimation shows that the extended model organizes the data remarkably well at both the aggregate and individual levels.

Keywords: Learning; Inferred foregone payoffs; Partial information; Bertrand experiment (search for similar items in EconPapers)
JEL-codes: C73 D43 D83 L13 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188914003091
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Learning from Inferred Foregone Payoffs (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:51:y:2015:i:c:p:445-458

DOI: 10.1016/j.jedc.2014.11.012

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().