Convergence to Rational Expectations in a Stationary Linear Game

James Jordan

The Review of Economic Studies, 1992, vol. 59, issue 1, 109-123

Abstract: This paper describes several learning processes which converge, with probability one, to the rational expectations (Bayesian-Nash) equilibrium of a stationary linear game. The learning processes include a test for convergence to equilibrium, and a method for changing the parameters of the process when non-convergence is indicated. This self-stabilization property eliminates the need to impose stability conditions on the economic environment. Convergence to equilibrium is proved for two types of self-stabilizing learning mechanisms: a centralized forecasting mechanism and a decentralized strategy adjustment process.

Date: 1992
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Working Paper: Convergence to Rational Expectations in a Stationary Linear Game (1990)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:59:y:1992:i:1:p:109-123.

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