Equilibrium Selection, Similarity Judgments and the "Nothing to Gain/Nothing to Lose" Effect

Jonathan Leland

No 604, CEEL Working Papers from Cognitive and Experimental Economics Laboratory, Department of Economics, University of Trento, Italia

Abstract: Rubinstein (1988, 2003) and Leland (1994, 1998, 2001, 2002) have shown that choices based on similarity judgments will account for the vast majority of observed violations of expected and discounted utility. In this paper, I show that such judgments also explain which equilibria will be selected in single-shot games with multiple equilibria, predict circumstances in which non-equilibria outcomes may predominate in such games, and predict circumstances in which specific pure strategy outcomes will predominate in games with no pure strategy equilibria.

Date: 2006
New Economics Papers: this item is included in nep-gth and nep-upt
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Working Paper: Equilibrium Selection, Similarity Judgments and the“Nothing to Gain/Nothing to Lose”Effect (2006)
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