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- Title
Tacit coordination games, strategic uncertainty, and...
- Authors
Van Huyck, John B.; Battalio, Raymond C.; Beil, Richard O.
- Abstract
Deductive equilibrium methods, such as rational expectations or Bayesian Nash Equilibrium are powerful tools for analyzing economies that exhibit strategic interdependence. Typically, deductive equilibrium analysis does not explain the process by which decision makers acquire equilibrium beliefs. The power of the equilibrium method derives from its ability to abstract from the complicated dynamic process that induces equilibrium and to abstract from the historical accident that initiated the process. In economies with multiple equilibria, the rational decision maker formulating beliefs using deductive equilibrium concepts is uncertain which equilibrium strategy and decision makers will use and when the equilibria are not interchangeable, this uncertainty will influence the rational decision-maker's behavior. This inefficient outcome is not due to conflicting objectives as in "prisoner's dilemma "games or to asymmetric information as in hazard" games.
- Subjects
ECONOMICS; BAYESIAN analysis; ECONOMIC equilibrium; DECISION making; RATIONAL expectations (Economic theory); GOAL (Psychology); MATHEMATICAL models of consumption; STRATEGIC planning
- Publication
American Economic Review, 1990, Vol 80, Issue 1, p234
- ISSN
0002-8282
- Publication type
Article