Rationalizability and learning in games with strategic heterogeneity

Anne-Christine Barthel () and Eric Hoffmann ()
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Anne-Christine Barthel: West Texas A&M University
Eric Hoffmann: West Texas A&M University

Economic Theory, 2019, vol. 67, issue 3, No 4, 565-587

Abstract: Abstract It is shown that in games of strategic heterogeneity (GSH), where both strategic complements and substitutes are present, there exist upper and lower serially undominated strategies which provide a bound for all other rationalizable strategies. By establishing a connection between learning in a repeated setting and the iterated deletion of strictly dominated strategies, we are able to provide necessary and sufficient conditions for dominance solvability and stability of equilibria. As a corollary, it is shown that only unique equilibria can be (globally) stable. Lastly, we provide conditions under which games that do not exhibit monotone best responses can be analyzed as a GSH. Applications to industrial organization, network games, and crime and punishment are given.

Keywords: Strategic complements; Strategic substitutes; Learning (search for similar items in EconPapers)
JEL-codes: C60 C70 C71 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (12)

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DOI: 10.1007/s00199-017-1092-6

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