Forthcoming : Endogenous clustering and analogy-based expectation equilibrium
Journal article: 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.
Author(s)
Philippe Jehiel, Giacomo Weber
Journal
- Review of Economic Studies
Date of publication
- 2025
Keywords JEL
Keywords
- Analogy-based expectation equilibrium
- Prototype theory
- K-means clustering
URL of the HAL notice
Version
- 1