Sophisticated play by idiosyncratic agents

David Myatt and Chris Wallace

Journal of Evolutionary Economics, 2003, vol. 13, issue 3, 319-345

Abstract: Agents are drawn from a large population and matched to play a symmetric $2\times2$ coordination game, the payoffs of which are perturbed by agent-specific heterogeneity. Individuals observe a (possibly sampled) history of play, which forms the initial hypothesis for an opponent's behaviour. Using this hypothesis as a starting point, the agents iteratively reason toward a Bayesian Nash equilibrium. When sampling is complete and the noise becomes vanishingly small, a single equilibrium is played almost all the time. A necessary and sufficient condition for selection, shown to be closely related (but not identical) to risk-dominance, is derived. When sampling is sufficiently incomplete, the risk-dominant equilibrium is played irrespective of the history observed. Copyright Springer Verlag Berlin/Heidelberg 2003

Keywords: Sampling; Risk-dominance; Sophisticated play; Idiosyncrasy; Anticipation (search for similar items in EconPapers)
Date: 2003
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Working Paper: Sophisticated Play by Idiosyncratic Agents (1999)
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DOI: 10.1007/s00191-003-0156-x

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