Unobserved heterogeneity and equilibrium: an experimental study of Bayesian and adaptive learning in normal form games.

Shachat, J.; Walker, M.

Abstract

We describe an experiment based on a simple two-person game designed so that different learning models make different predictions. Econometric analysis of the experimental data reveals clear heterogeneity in the subjects’ learning behavior. But the subjects follow only a few decision rules for basing their play on their information, and these rules have simple cognitive interpretations. There is a unique equilibrium in pure strategies, and many equilibria in mixed strategies. We find that the only equilibrium consistent with the data is one of the mixed strategy equilibria. This equilibrium is shown, surprisingly, to be consistent with Jordan's Bayesian model.

Citation

Shachat, J., & Walker, M. (2004). Unobserved heterogeneity and equilibrium: an experimental study of Bayesian and adaptive learning in normal form games. Journal of Economic Theory, 114(2), 280-309. https://doi.org/10.1016/s0022-0531%2803%2900125-x

• Journal Article Type: Article
• Publication Date: 2004-02
• Deposit Date: Sep 17, 2014
• Journal: Journal of Economic Theory
• Print ISSN: 0022-0531
• Electronic ISSN: 1095-7235
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 114
• Issue: 2
• Pages: 280-309
• DOI: https://doi.org/10.1016/s0022-0531%2803%2900125-x
• Public URL: https://durham-repository.worktribe.com/output/1445287