Revisiting Games of Incomplete Information with Analogy-Based Expectations

Philippe Jehiel () and Frederic Koessler

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Abstract: This paper studies the effects of analogy-based expectations in static two-player games of incomplete information. Players are assumed to be boundedly rational in the way they forecast their opponent's state-contingent strategy: they bundle states into analogy classes and play best-responses to their opponent's average strategy in those analogy classes. We provide general properties of analogy-based expectation equilibria and apply the model to a variety of well known games. We characterize conditions on the analogy partitions for successful coordination in coordination games under incomplete information [Rubinstein, A., 1989. The electronic mail game: Strategic behavior under 'almost common knowledge'. Amer. Econ. Rev. 79, 385-391], we show how analogy grouping of the receiver may facilitate information transmission in Crawford and Sobel's cheap talk games [Crawford, V.P., Sobel, J., 1982. Strategic information transmission. Econometrica 50, 1431-1451], and we show how analogy grouping may give rise to betting in zero-sum betting games such as those studied to illustrate the no trade theorem.

Keywords: Analogy expectation; Bayesian games; Bounded rationality; Coordination; Incomplete information; Betting; Strategic information transmission (search for similar items in EconPapers)
Date: 2008-03
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Citations: View citations in EconPapers (94)

Published in Games and Economic Behavior, 2008, 62 (2), pp.533-557. ⟨10.1016/j.geb.2007.06.006⟩

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Related works:
Journal Article: Revisiting games of incomplete information with analogy-based expectations (2008)
Working Paper: Revisiting Games of Incomplete Information with Analogy-Based Expectations (2008)
Working Paper: Revisiting Games of Incomplete Information with Analogy-Based Expectations (2006)
Working Paper: Revisiting Games of Incomplete Information with Analogy-Based Expectations (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00754297

DOI: 10.1016/j.geb.2007.06.006

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