Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150095
Authors: 
Jehiel, Philippe
Samet, Dov
Year of Publication: 
2007
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 2 [Year:] 2007 [Issue:] 2 [Pages:] 163-185
Abstract: 
We introduce a new solution concept for games in extensive form with perfect information, valuation equilibrium, which is based on a partition of each player's moves into similarity classes. A valuation of a player is a real-valued function on the set of her similarity classes. In this equilibrium each player's strategy is optimal in the sense that at each of her nodes, a player chooses a move that belongs to a class with maximum valuation. The valuation of each player is consistent with the strategy profile in the sense that the valuation of a similarity class is the player's expected payoff, given that the path (induced by the strategy profile) intersects the similarity class. The solution concept is applied to decision problems and multi-player extensive form games. It is contrasted with existing solution concepts. The valuation approach is next applied to stopping games, in which non-terminal moves form a single similarity class, and we note that the behaviors obtained echo some biases observed experimentally. Finally, we tentatively suggest a way of endogenizing the similarity partitions in which moves are categorized according to how well they perform relative to the expected equilibrium value, interpreted as the aspiration level.
Subjects: 
Game theory
bounded rationality
valuation
similarity
aspiration
JEL: 
C72
D81
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/2.5
Document Type: 
Article

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