Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/78419 
Year of Publication: 
2001
Series/Report no.: 
Bonn Econ Discussion Papers No. 23/2001
Publisher: 
University of Bonn, Bonn Graduate School of Economics (BGSE), Bonn
Abstract: 
Two subjects have to repeatedly choose between two alternatives, A and B, where payoffs of an A or B-choice depend on the choices made by both players in a number of previous choices. Locally, alternative A gives always more payoff than alternative B. However, in terms of overall payoffs exclusive choice of B is a better strategy. The equilibrium predicted by the theory of melioration is to exclusively play A, while the Nash equilibrium is to almost exclusively play B. The predictive values of such equilibria are analyzed under three different informational conditions. Special attention is paid to the learning processes exhibited by players.
Subjects: 
Bounded rationality
Psychology
Melioration
Nash equilibrium
Information
Learning
JEL: 
C72
C92
D83
Document Type: 
Working Paper

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