Convergence in economic models with Bayesian hierarchies of beliefs

Yaw Nyarko

    Research output: Contribution to journalArticle

    Abstract

    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.

    Original languageEnglish (US)
    Pages (from-to)266-296
    Number of pages31
    JournalJournal of Economic Theory
    Volume74
    Issue number2
    DOIs
    StatePublished - Jun 1997

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    Violations
    Continuity
    Stochastic processes
    Contraction
    Bayesian updating
    Nash equilibrium
    Economics
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    ASJC Scopus subject areas

    • Economics and Econometrics

    Cite this

    Convergence in economic models with Bayesian hierarchies of beliefs. / Nyarko, Yaw.

    In: Journal of Economic Theory, Vol. 74, No. 2, 06.1997, p. 266-296.

    Research output: Contribution to journalArticle

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