6533b86cfe1ef96bd12c8268
RESEARCH PRODUCT
Bounded Computational Capacity Equilibrium
Penélope HernándezEilon Solansubject
TheoryofComputation_MISCELLANEOUSEconomics and EconometricsComputer Science::Computer Science and Game TheoryBounded rationality automata complexity infnitely repeated games equilibrium.EconomiaOutcome (game theory)Set (abstract data type)Lexicographic preferences0502 economics and businessFOS: MathematicsFolk theoremMathematics - Optimization and ControlMathematicsFinite-state machine05 social sciencesProbability (math.PR)ComputingMilieux_PERSONALCOMPUTING050301 educationTheoryofComputation_GENERALBounded rationalityOptimization and Control (math.OC)Bounded functionRepeated game050206 economic theory0503 educationMathematical economicsMathematics - Probabilitydescription
We study repeated games played by players with bounded computational power, where, in contrast to Abreu and Rubisntein (1988), the memory is costly. We prove a folk theorem: the limit set of equilibrium payoffs in mixed strategies, as the cost of memory goes to 0, includes the set of feasible and individually rational payoffs. This result stands in sharp contrast to Abreu and Rubisntein (1988), who proved that when memory is free, the set of equilibrium payoffs in repeated games played by players with bounded computational power is a strict subset of the set of feasible and individually rational payoffs. Our result emphasizes the role of memory cost and of mixing when players have bounded computational power.
| year | journal | country | edition | language |
|---|---|---|---|---|
| 2010-08-16 |