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Heuristics in experiments with infinitely large strategy spaces

Jørgen Vitting Andersen () and Philippe De Peretti ()
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Jørgen Vitting Andersen: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CNRS - Centre National de la Recherche Scientifique
Philippe De Peretti: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

Abstract: We introduce a new methodology that enables detection of the onset of convergence towards Nash equilibria in simple repeated games with infinitely large strategy spaces, thereby revealing the heuristics used in decisionmaking. The method works by constraining on a special finite subset of strategies, called decoupled strategies. We show how the technique can be applied to understand price formation in financial market experiments by introducing a predictive measure ΔD: the different between positive decoupled strategies (recommending to buy) and negative decoupled strategies (recommending to sell). Using ΔD we illustrate how the method can predict (at certain special times) participants' actions with a high success rate in a series of experiments.

Keywords: Complexity theory; Decoupling; Infinite strategy space; Multi-period games; Bounded rationality; Agent-based modeling (search for similar items in EconPapers)
Date: 2020-05
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-02435934
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Published in Journal of Business Research, Elsevier, 2020, 129, pp.612-620. ⟨10.1016/j.jbusres.2019.12.034⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-02435934

DOI: 10.1016/j.jbusres.2019.12.034

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