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Valuation equilibria

Jehiel, P.; Samet, D.; (2003) Valuation equilibria. (ELSE Working Papers 73). ESRC Centre for Economic Learning and Social Evolution: London, UK. Green open access

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Abstract

We introduce a new solution concept for games in extensive form with perfect information: the valuation equilibrium. The moves of each player are partitioned into similarity classes. A valuation of the player is a real valued function on the set of her similarity classes. At each node a player chooses a move that belongs to a class with maximum valuation. The valuation of each player is consistent with the strategy profile in the sense that the valuation of a similarity class is the player expected payoff given that the path (induced by the strategy profile) intersects the similarity class. The solution concept is applied to decision problems and multi-player extensive form games. It is contrasted with existing solution concepts. An aspiration-based approach is also proposed, in which the similarity partitions are determined endogenously. The corresponding equilibrium is called the aspiration-based valuation equilibrium (ASVE). While the Subgame Perfect Nash Equilibrium is always an ASVE, there are other ASVE in general. But, in zero-sum two-player games without chance moves every player must get her value in any ASVE.

Type: Working / discussion paper
Title: Valuation equilibria
Open access status: An open access version is available from UCL Discovery
Publisher version: http://else.econ.ucl.ac.uk/newweb/papers.php#2003
Language: English
Keywords: JEL classification: C72, D81. Game theory, bounded rationality, valuation, similarity, aspiration
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/14612
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