TY - JOUR
T1 - Convergence in economic models with Bayesian hierarchies of beliefs
AU - Nyarko, Yaw
N1 - Funding Information:
* I thank the C. V. Starr Center and the Presidential Fellowship Fund at New York University for their generosity. I also thank Professors Larry Blume, David Easley, Jim Jordan, and Mike Woodford for many helpful discussions. All errors in this paper are my own responsibility. I also thank an anonymous referee for his her comments.
PY - 1997/6
Y1 - 1997/6
N2 - I study a model where hierarchies of beliefs (the beliefs about the beliefs of other agents, etc.) are important. I provide conditions under which optimal actions of agents will converge to the Nash equilibrium of the model characterized by the true, previously unknown "fundamentals." The conditions are (i) a contraction property on the best-response mappings and (ii) a mutual absolute continuity condition on beliefs. Violation of (i) may result in an "anything is possible" result: any stochastic process of actions is consistent with maximizing behavior and Bayesian updating. Violation of (ii) may result in cyclical behavior of actions on each sample path.Journal of Economic LiteratureClassification Numbers: C70, C73, D81, D82, D83, D84.
AB - I study a model where hierarchies of beliefs (the beliefs about the beliefs of other agents, etc.) are important. I provide conditions under which optimal actions of agents will converge to the Nash equilibrium of the model characterized by the true, previously unknown "fundamentals." The conditions are (i) a contraction property on the best-response mappings and (ii) a mutual absolute continuity condition on beliefs. Violation of (i) may result in an "anything is possible" result: any stochastic process of actions is consistent with maximizing behavior and Bayesian updating. Violation of (ii) may result in cyclical behavior of actions on each sample path.Journal of Economic LiteratureClassification Numbers: C70, C73, D81, D82, D83, D84.
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U2 - 10.1006/jeth.1996.2254
DO - 10.1006/jeth.1996.2254
M3 - Article
AN - SCOPUS:0031161416
SN - 0022-0531
VL - 74
SP - 266
EP - 296
JO - Journal of Economic Theory
JF - Journal of Economic Theory
IS - 2
ER -