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Strategic interactions, incomplete information and learning

Berardi, Michele (2012): Strategic interactions, incomplete information and learning.

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Abstract

In a model of incomplete, heterogeneous information, with externalities and strategic interactions, we analyze the possibility for learning to act as coordination device. We build on the framework proposed by Angeletos and Pavan (2007) and extend it to a dynamic multiperiod setting where agents need to learn to coordinate. We analyze conditions under which adaptive and eductive learning obtain, and show that adaptive learning conditions are less demanding than the eductive ones: in particular, when actions are strategic substitutes, the equilibrium is always adaptively learnable, while it might not be eductively so. In case of heterogeneous preferences, moreover, convergence only depends on the average characteristic of agents in the economy. We also show that adaptive learning dynamics converge to the game theoretical strategic equilibrium, which means that agents can learn to act strategically in a simple and straightforward way.

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