Endogenous clustering and analogy-based expectation equilibrium

Philippe Jehiel () and Giacomo Weber

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Abstract: Normal-form two-player games are categorized by players into K analogy classes so as to minimize the prediction error about the behavior of the opponent. This results in Clustered Analogy-Based Expectation Equilibria in which strategies are analogy-based expectation equilibria given the analogy partitions and analogy partitions minimize the prediction errors given the strategies. We distinguish between environments with self-repelling analogy partitions in which some mixing over partitions is required and environments with self-attractive partitions in which several analogy partitions can arise, thereby suggesting new channels of belief heterogeneity and equilibrium multiplicity. Various economic applications are discussed.

Date: 2025-05
New Economics Papers: this item is included in nep-gth and nep-mic
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http://arxiv.org/pdf/2505.13022 Latest version (application/pdf)

Related works:
Working Paper: Endogenous clustering and analogy-based expectation equilibrium (2025)
Working Paper: Endogenous Clustering and Analogy-Based Expectation Equilibrium (2025)
Working Paper: Endogenous clustering and analogy-based expectation equilibrium (2025)
Working Paper: Endogenous Clustering and Analogy-Based Expectation Equilibrium (2025)
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