Online Concealed Correlation by Boundedly Rational Players

Gilad Bavly and Abraham Neyman ()

Discussion Paper Series from The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem

Abstract: In a repeated game with perfect monitoring, correlation among a group of players may evolve in the common course of play (online correlation). Such a correlation may be concealed from a boundedly rational player. The feasibility of such “online concealed correlation” is quantified by the individually rational payoff of the boundedly rational player. We show that “strong” players, i.e., players whose strategic complexity is less stringently bounded, can orchestrate online correlation of the actions of “weak” players, in a manner that is concealed from an opponent of “intermediate” strength. The result is illustrated in two models, each captures another aspect of bounded rationality. In the first, players use bounded recall strategies. In the second, players use strategies that are implementable by finite automata.

Pages: 36 pages
Date: 2003-09
New Economics Papers: this item is included in nep-gth and nep-mic
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Citations: View citations in EconPapers (13)

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