Azrieli, Yaron (2007): Thinking categorically about others: A conjectural equilibrium approach.
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Inspired by the social psychology literature, we study the implications of categorical thinking on decision making in the context of a large normal form game. Every agent has a categorization (partition) of her opponents and can only observe the average behavior in each category. A strategy profile is a Conjectural Categorical Equilibrium (CCE) with respect to a given categorization profile if every player's strategy is a best response to some consistent conjecture about the strategies of her opponents.
We show that, for a wide family of games and for a particular categorization profile, every CCE becomes almost Nash as the number of players grows. An equivalence of CCE and Nash equilibrium is achieved in the settings of a non-atomic game. This highlights the advantage of categorization as a simplifying mechanism in complex environments. With much less information in their hands agents behave as if they see the full picture. Some properties of CCE when players categorize `non-optimally' are also considered.
|Item Type:||MPRA Paper|
|Original Title:||Thinking categorically about others: A conjectural equilibrium approach|
|Keywords:||Categorization; Conjectural equilibrium; Large games|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D84 - Expectations; Speculations
D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D81 - Criteria for Decision-Making under Risk and Uncertainty
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
|Depositing User:||Yaron Azrieli|
|Date Deposited:||05. Jul 2007|
|Last Modified:||15. Feb 2013 21:26|
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