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Similarity Nash Equilibria in Statistical Games

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  • Rossella Argenziano
  • Itzhak Gilboa

Abstract

A statistical game is a game in which strategic interaction is mediated via a binary outcome y, coupled with a prediction problem where a characteristic x of the game may be used to predict its outcome y based on past values of (x, y). In Similarity Nash Equilibria, players combine statistical and strategic reasoning, using an estimate of y as a coordination device. They predict y by its similarity-weighted frequency and learn the optimal notion of similarity from the data. We prove that the model captures the importance of precedents and the endogenous formation of sunspots.

Suggested Citation

  • Rossella Argenziano & Itzhak Gilboa, 2023. "Similarity Nash Equilibria in Statistical Games," American Economic Journal: Microeconomics, American Economic Association, vol. 15(3), pages 354-386, August.
    • Handle: RePEc:aea:aejmic:v:15:y:2023:i:3:p:354-86
    DOI: 10.1257/mic.20220049
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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