Learning aspiration in repeated games

In Koo Cho, Akihiko Matsui

Research output: Contribution to journalArticlepeer-review

Abstract

We study infinitely repeated symmetric 2 × 2 games played by bounded rational agents who follow a simple rule of thumb: each agent continues to play the same action if the current payoff exceeds the average of the past payoffs, and switches to the other action with a positive probability otherwise. By applying the stochastic approximation technique, we characterize the asymptotic outcomes for all 2×2 games. In the prisoners' dilemma game, for example, the players cooperate in the limit if and only if the gain from defecting against cooperation is "modest."

Original languageEnglish (US)
Pages (from-to)171-201
Number of pages31
JournalJournal of Economic Theory
Volume124
Issue number2
DOIs
StatePublished - Oct 2005

Keywords

  • Aspiration
  • Bounded rationality
  • Cooperation
  • Mean dynamics
  • Recursive learning
  • Repeated games
  • Satisficing behavior
  • Stochastic approximation

ASJC Scopus subject areas

  • Economics and Econometrics

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