Bounded rationality and correlated equilibria

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• dc.contributor.author Germano, Fabrizio
• dc.contributor.author Zuazo-Garin, Peio
• dc.date.accessioned 2019-01-08T10:18:36Z
• dc.date.available 2019-01-08T10:18:36Z
• dc.date.issued 2017
• dc.description.abstract We study an interactive framework that explicitly allows for nonrational behavior. We do not place any restrictions on how players’ behavior deviates from rationality, but rather, on players’ higher-order beliefs about the frequency of such deviations. We assume that there exists a probability p such that all players believe, with at least probability p, that their opponents play rationally. This, together with the assumption of a common prior, leads to what we call the set of p-rational outcomes, which we define and characterize for arbitrary probability p. We then show that this set varies continuously in p and converges to the set of correlated equilibria as p approaches 1, thus establishing robustness of the correlated equilibrium concept to relaxing rationality and common knowledge of rationality. The p-rational outcomes are easy to compute, also for games of incomplete information. Importantly, they can be applied to observed frequencies of play for arbitrary normal-form games to derive a measure of rationality p that bounds from below the probability with which any given player chooses actions consistent with payoff maximization and common knowledge of payoff maximization.en
• dc.description.sponsorship Germano acknowledges financial support from the Spanish Ministry of Economy and Competitiveness (Grant ECO2014-59225-P), as well as from the Barcelona GSE Research Network and the Generalitat de Catalunya. Zuazo-Garin acknowledges financial support from the Spanish Ministry of Science and Technology (Grant ECO2009-11213), from the Spanish Ministry of Economy and Competitiveness (Grant ECO2012-31326) and from the Basque Government (Grants IT568-13 and POS-2015-1-0022).
• dc.format.mimetype application/pdf
• dc.identifier.citation Germano F, Zuazo-Garin P. Bounded rationality and correlated equilibria. Int J Game Theory. 2017 Aug;46(3):595-629. DOI: 10.1007/s00182-016-0547-5
• dc.identifier.doi http://dx.doi.org/10.1007/s00182-016-0547-5
• dc.identifier.issn 0020-7276
• dc.identifier.uri http://hdl.handle.net/10230/36218
• dc.language.iso eng
• dc.publisher Springer
• dc.relation.ispartof International Journal of Game Theory. 2017 Aug;46(3):595-629.
• dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/ECO2014-59225-P
• dc.relation.projectID info:eu-repo/grantAgreement/ES/3PN/ECO2009-11213
• dc.relation.projectID info:eu-repo/grantAgreement/ES/3PN/ECO2012-31326
• dc.rights © Springer The final publication is available at Springer via http://dx.doi.org/10.1007/s00182-016-0547-5
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.subject.keyword Strategic interaction
• dc.subject.keyword Correlated equilibrium
• dc.subject.keyword Robustness to bounded rationality
• dc.subject.keyword Approximate knowledge
• dc.subject.keyword Incomplete information
• dc.subject.keyword Measure of rationality
• dc.subject.keyword Experiments
• dc.title Bounded rationality and correlated equilibria
• dc.type info:eu-repo/semantics/article
• dc.type.version info:eu-repo/semantics/acceptedVersion