Valuation Equilibrium

Philippe Jehiel () and Dov Samet

PSE-Ecole d'économie de Paris (Postprint) from HAL

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)
Date: 2007-06
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Citations: View citations in EconPapers (15)

Published in Theoretical Economics, 2007, 2 (2), pp.163-185

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Related works:
Journal Article: 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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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-00754229

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