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A Necessary And Sufficient Condition For Convergence Of Statistical To Strategic Equilibria Of Market Games

Author

Listed:
  • DIMITRIOS P. TSOMOCOS

    (Said Business School & St. Edmund Hall, University of Oxford, Park End Street, Oxford, Oxfordshire OX1 1HP, UK;
    Financial Markets Group, LSE, UK)

  • DIMITRIS VOLIOTIS

    (Department of Banking and Financial Management, University of Piraeus, 80 Karaoli & Dimitriou str., Piraeus, 18534, Greece)

Abstract

We analyze a market game where traders are heterogeneous with respect to their rationality level and have asymmetric information. The market mechanism results into a statistical equilibrium, where traders randomise among their available actions due to their limited rationality. We provide a necessary and sufficient condition for convergence of statistical to strategic equilibria of market games, when traders become more informed and increasingly more rational.

Suggested Citation

  • Dimitrios P. Tsomocos & Dimitris Voliotis, 2009. "A Necessary And Sufficient Condition For Convergence Of Statistical To Strategic Equilibria Of Market Games," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 11(04), pages 479-489.
    • Handle: RePEc:wsi:igtrxx:v:11:y:2009:i:04:n:s0219198909002467
    DOI: 10.1142/S0219198909002467
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    Keywords

    Market games; bounded rationality; rational learning; C70; D51; D81; 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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