Jehiel, P;
Samet, D;
(2007)
Valuation equilibrium.
Theoretical Economics
, 2
(2)
163 -185.
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Abstract
We introduce a new solution concept for games in extensive form with perfect information, valuation equilibrium, which is based on a partition of each player's moves into similarity classes. A valuation of a player'is a real-valued function on the set of her similarity classes. In this equilibrium each player's strategy is optimal in the sense that at each of her nodes, 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's 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. The valuation approach is next applied to stopping games, in which non-terminal moves form a single similarity class, and we note that the behaviors obtained echo some biases observed experimentally. Finally, we tentatively suggest a way of endogenizing the similarity partitions in which moves are categorized according to how well they perform relative to the expected equilibrium value, interpreted as the aspiration level.
Type: | Article |
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Title: | Valuation equilibrium |
Open access status: | An open access version is available from UCL Discovery |
Publisher version: | http://econtheory.org/ojs/index.php/te/article/vie... |
Language: | English |
Additional information: | Copyright c © 2007 Philippe Jehiel and Dov Samet. Licensed under the Creative Commons Attribution- NonCommercial License 2.5 . Available at http://econtheory.org |
UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
URI: | https://discovery.ucl.ac.uk/id/eprint/45887 |
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