Bounded rationality, strategy simplification, and equilibrium

DOI10.1007/S00182-011-0293-7zbMATH Open1304.91039arXiv1002.4577OpenAlexW1563707431MaRDI QIDQ361802FDOQ361802

Authors: Hubie Chen 

Publication date: 19 August 2013

Published in: International Journal of Game Theory (Search for Journal in Brave)

Abstract: It is frequently suggested that predictions made by game theory could be improved by considering computational restrictions when modeling agents. Under the supposition that players in a game may desire to balance maximization of payoff with minimization of strategy complexity, Rubinstein and co-authors studied forms of Nash equilibrium where strategies are maximally simplified in that no strategy can be further simplified without sacrificing payoff. Inspired by this line of work, we introduce a notion of equilibrium whereby strategies are also maximally simplified, but with respect to a simplification procedure that is more careful in that a player will not simplify if the simplification incents other players to deviate. We study such equilibria in two-player machine games in which players choose finite automata that succinctly represent strategies for repeated games; in this context, we present techniques for establishing that an outcome is at equilibrium and present results on the structure of equilibria.

Full work available at URL: https://arxiv.org/abs/1002.4577

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zbMATH Keywords

automatabounded rationalityrepeated gamesimplification

Mathematics Subject Classification ID

2-person games (91A05) Multistage and repeated games (91A20) Rationality and learning in game theory (91A26)

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Cited In (6)

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• Complexity of games and bounded rationality
• Implementation in adaptive better-response dynamics: towards a general theory of bounded rationality in mechanisms
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• Directed graphical structure, Nash equilibrium, and potential games
• Bounded rationality. A Simon-like explication

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