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Which misspecifications persist?

Author

Listed:
  • Fudenberg, Drew

    (Department of Economics, Massachusetts Institute of Technology)

  • Lanzani, Giacomo

    (Department of Economics, Massachusettes Institute of Technology)

Abstract

We use an evolutionary model to determine which misperceptions can persist. Every period, a new generation of agents use their subjective models and the data generated by the previous generation to update their beliefs, and models that induce better actions become more prevalent. An equilibrium can resist mutations that lead agents to use a model that better fits the equilibrium data but induce the mutated agents to take an action with lower payoffs. We characterize which steady states resist mutations to a nearby model, and which resist mutations that drop a qualitative restriction such as independence.

Suggested Citation

  • Fudenberg, Drew & Lanzani, Giacomo, 2023. "Which misspecifications persist?," Theoretical Economics, Econometric Society, vol. 18(3), July.
    • Handle: RePEc:the:publsh:5298
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Misspecified learning; Berk-Nash equilibrium; evolution; payoff monotone dynamics;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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