Rational Learning Leads to Nash Equilibrium

This paper published in the September 1993 issue of Econometrica: Journal of the Econometric Society and available through JSTOR, presents a theoretical study on how players in infinitely repeated games with rational learning will eventually converge to playing a Nash equilibrium. The authors, Ehud Kalai and Ehud Lehrer, explore how players with subjective beliefs about their opponents' strategies, under certain conditions including absolute continuity of true strategies with respect to beliefs and perfect monitoring, will learn to predict the game's future play accurately. This Bayesian updating process, driven by each player's goal to maximize their expected utility, leads to a state where the players' actions approximate an epsilon-Nash equilibrium of the repeated game. The paper contrasts this approach with models assuming bounded rationality or myopic play, highlighting the importance of players knowing their own payoff matrices and having beliefs compatible with the truth.keepSave to notecopy_alldocsAdd noteaudio_magic_eraserAudio OverviewflowchartMind Map