q-fin updates on arXiv.org
Tue, 28 Jan 2020 06:01:16 GMT language
Player-Compatible Equilibrium (PCE) imposes cross-player restrictions on the
magnitudes of the players' "trembles" onto different strategies. These
restrictions capture the idea that trembles correspond to deliberate
experiments by agents who are unsure of the prevailing distribution of play.
PCE selects intuitive equilibria in a number of examples where trembling-hand
perfect equilibrium (Selten, 1975) and proper equilibrium (Myerson, 1978) have
no bite. We show that rational learning and some commonly used heuristics imply
our compatibility restrictions in a steady-state setting.