Valuation equilibrium
, () and
, ()
Additional contact information
,: PSE and UCL
,: Tel Aviv University
Authors registered in the RePEc Author Service: Philippe Jehiel () and
Dov Samet
Theoretical Economics, 2007, vol. 2, issue 2
Abstract:
We introduce a new solution concept for games in extensive form with perfect information, valuation equilibrium, which is based on a partition of each player's moves into similarity classes. A valuation of a player is a real-valued function on the set of her similarity classes. In this equilibrium each player's strategy is optimal in the sense that at each of her nodes, a player chooses a move that belongs to a class with maximum valuation. The valuation of each player is consistent with the strategy profile in the sense that the valuation of a similarity class is the player's expected payoff, given that the path (induced by the strategy profile) intersects the similarity class. The solution concept is applied to decision problems and multi-player extensive form games. It is contrasted with existing solution concepts. The valuation approach is next applied to stopping games, in which non-terminal moves form a single similarity class, and we note that the behaviors obtained echo some biases observed experimentally. Finally, we tentatively suggest a way of endogenizing the similarity partitions in which moves are categorized according to how well they perform relative to the expected equilibrium value, interpreted as the aspiration level.
Keywords: Game theory; bounded rationality; valuation; similarity; aspiration (search for similar items in EconPapers)
JEL-codes: C72 D81 (search for similar items in EconPapers)
Date: 2007-06-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)
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Related works:
Working Paper: Valuation Equilibrium (2007)
Working Paper: Valuation Equilibrium (2007)
Working Paper: Valuation Equilibria (2006) 
Working Paper: Valuation Equilibria (2003) 
Working Paper: Valuation Equilibria (2003) 
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