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Player-Compatible Learning and Player-Compatible Equilibrium

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  • Drew Fudenberg
  • Kevin He

Abstract

Player-Compatible Equilibrium (PCE) imposes cross-player restrictions on the magnitudes of the players' "trembles" onto different strategies. These restrictions capture the idea that trembles correspond to deliberate experiments by agents who are unsure of the prevailing distribution of play. PCE selects intuitive equilibria in a number of examples where trembling-hand perfect equilibrium (Selten, 1975) and proper equilibrium (Myerson, 1978) have no bite. We show that rational learning and weighted fictitious play imply our compatibility restrictions in a steady-state setting.

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  • Drew Fudenberg & Kevin He, 2017. "Player-Compatible Learning and Player-Compatible Equilibrium," Papers 1712.08954, arXiv.org, revised May 2020.
    • Handle: RePEc:arx:papers:1712.08954
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    References listed on IDEAS

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    Cited by:

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    2. Milgrom, Paul & Mollner, Joshua, 2021. "Extended proper equilibrium," Journal of Economic Theory, Elsevier, vol. 194(C).

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    JEL classification:

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

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