Unobserved heterogeneity and equilibrium: An experimental study of Bayesian and adaptive learning in normal form games

Jason Shachat, Mark A Walker

Research output: Contribution to journalArticle

4 Scopus citations

Abstract

We describe an experiment based on a simple two-person game designed so that different learning models make different predictions. Econometric analysis of the experimental data reveals clear heterogeneity in the subjects' learning behavior. But the subjects follow only a few decision rules for basing their play on their information, and these rules have simple cognitive interpretations. There is a unique equilibrium in pure strategies, and many equilibria in mixed strategies. We find that the only equilibrium consistent with the data is one of the mixed strategy equilibria. This equilibrium is shown, surprisingly, to be consistent with Jordan's Bayesian model.

Original languageEnglish (US)
Pages (from-to)280-309
Number of pages30
JournalJournal of Economic Theory
Volume114
Issue number2
DOIs
Publication statusPublished - Feb 2004

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Keywords

  • Bayesian learning
  • Experiments
  • Heterogeneity

ASJC Scopus subject areas

  • Economics and Econometrics

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