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When Aspiring And Rational Agents Strive To Coordinate

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  • JAIDEEP ROY

    (Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom)

Abstract

The paper studies a game of common interest played infinitely many times between two players, one being aspiration driven while the other being a myopic optimizer. It is shown that the only two long run stationary outcomes are the two static equilibrium points. Robustness of long run behavior is studied to show that whenever the optimizer is allowed to make small mistakes, players are able to coordinate on the Pareto dominant equilibrium point most of the time in the long run if the speed of evolution of aspirations is sufficiently fast. However, when only the aspiring player is allowed to make small mistakes, achieving coordination is inevitable and independent of the speed at which aspirations evolve.

Suggested Citation

  • Jaideep Roy, 2007. "When Aspiring And Rational Agents Strive To Coordinate," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 461-475.
    • Handle: RePEc:wsi:igtrxx:v:09:y:2007:i:03:n:s0219198907001539
    DOI: 10.1142/S0219198907001539
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    References listed on IDEAS

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    1. Bendor, J. & Mookherjee, D. & Ray, D., 1994. "Aspirations, adaptive learning and cooperation in repeated games," Discussion Paper 1994-42, Tilburg University, Center for Economic Research.
    2. Amit Pazgal, 1995. "Satisficing Leads to Cooperation in Mutual Interests Games," Discussion Papers 1126, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Binmore, Ken & Samuelson, Larry, 1997. "Muddling Through: Noisy Equilibrium Selection," Journal of Economic Theory, Elsevier, vol. 74(2), pages 235-265, June.
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    More about this item

    Keywords

    Coordination; evolution of aspiration; myopic optimization; JEL Classification: C72; JEL Classification: D83;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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