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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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    1. 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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    7. Joel Sobel, 1985. "A Theory of Credibility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(4), pages 557-573.
    8. Andrea Wilson, 2003. "Bounded Memory and Biases in Information Processing," NajEcon Working Paper Reviews 234936000000000070, www.najecon.org.
    9. Rubinstein, Ariel, 1986. "Finite automata play the repeated prisoner's dilemma," Journal of Economic Theory, Elsevier, vol. 39(1), pages 83-96, June.
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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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