Learning by Similarity in Coordination Problems

CERGE-EI Working Paper No. 324

45 Pages Posted: 30 Mar 2008

See all articles by Jakub Steiner

Jakub Steiner

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute)

Colin Stewart

Yale University

Date Written: April 1, 2007

Abstract

We study a learning process in which subjects extrapolate from their experience of similar past strategic situations to the current decision problem. When applied to coordination games, this learning process leads to contagion of behavior from problems with extreme payoffs and unique equilibria to very dissimilar problems. In the long-run, contagion results in unique behavior even though there are multiple equilibria when the games are analyzed in isolation. Characterization of the long-run state is based on a formal parallel to rational equilibria of games with subjective priors. The results of contagion due to learning share the qualitative features of those from contagion due to incomplete information, but quantitatively they differ.

Keywords: Similarity, learning, contagion, case-based reasoning, global games, coordination, subjective priors

Suggested Citation

Steiner, Jakub and Stewart, Colin, Learning by Similarity in Coordination Problems (April 1, 2007). CERGE-EI Working Paper No. 324, Available at SSRN: https://ssrn.com/abstract=1114362 or http://dx.doi.org/10.2139/ssrn.1114362

Jakub Steiner (Contact Author)

Charles University in Prague - CERGE-EI (Center for Economic Research and Graduate Education - Economics Institute) ( email )

P.O. Box 882
7 Politickych veznu
Prague 1, 111 21
Czech Republic
+420 605 286 947 (Phone)

HOME PAGE: http://www.cerge-ei.cz

Colin Stewart

Yale University ( email )

New Haven, CT 06520
United States

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