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Incentive constraints in games with bounded memory

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  • Daniel Monte

Abstract

In this paper I analyze a repeated coordination game between a bounded memory player and a fully rational player. A bounded memory player is a player who is subject to imperfect recall, but, conditional on this constraint, acts optimally every point in time given her beliefs over the actual history of the game. I show that the results contrast with the ones in the finite automata literature. In particular, a result denoted the “tyranny of the weak” in Gilboa and Samet (Games Econ Behav 1: 213–221, 1989 ) is no longer present here. Copyright Springer-Verlag Berlin Heidelberg 2014

Suggested Citation

  • Daniel Monte, 2014. "Incentive constraints in games with bounded memory," International Journal of Game Theory, Springer;Game Theory Society, vol. 43(1), pages 137-143, February.
    • Handle: RePEc:spr:jogath:v:43:y:2014:i:1:p:137-143
    DOI: 10.1007/s00182-013-0376-8
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    References listed on IDEAS

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    2. Piccione, Michele & Rubinstein, Ariel, 1997. "On the Interpretation of Decision Problems with Imperfect Recall," Games and Economic Behavior, Elsevier, vol. 20(1), pages 3-24, July.
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    5. Joel Sobel, 1985. "A Theory of Credibility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(4), pages 557-573.
    6. Andrea Wilson, 2003. "Bounded Memory and Biases in Information Processing," NajEcon Working Paper Reviews 234936000000000070, www.najecon.org.
    7. Gilboa, Itzhak & Samet, Dov, 1989. "Bounded versus unbounded rationality: The tyranny of the weak," Games and Economic Behavior, Elsevier, vol. 1(3), pages 213-221, September.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Bounded memory; Commitment; Automaton; C72; D82; D83;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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