Growth of strategy sets, entropy, and nonstationary bounded recall

Abraham Neyman () and Daijiro Okada

Games and Economic Behavior, 2009, vol. 66, issue 1, 404-425

Abstract: The paper initiates the study of long term interactions where players' bounded rationality varies over time. Time dependent bounded rationality, for player i, is reflected in part in the number [psi]i(t) of distinct strategies available to him in the first t-stages. We examine how the growth rate of [psi]i(t) affects equilibrium outcomes of repeated games. An upper bound on the individually rational payoff is derived for a class of two-player repeated games, and the derived bound is shown to be tight. As a special case we study the repeated games with nonstationary bounded recall and show that, a player can guarantee the minimax payoff of the stage game, even against a player with full recall, by remembering a vanishing fraction of the past. A version of the folk theorem is provided for this class of games.

Keywords: Bounded; rationality; Strategy; set; growth; Strategic; complexity; Nonstationary; bounded; recall; Repeated; games; Entropy (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (7)

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Related works:
Working Paper: Growth of Strategy Sets, Entropy, and Nonstationary Bounded Recall (2005)
Working Paper: Growth of Strategy Sets, Entropy and Nonstationary Bounded Recall (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:66:y:2009:i:1:p:404-425

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