Multi-dimensional Reasoning in Games: Framework, Equilibrium and Applications
- American Economic Journal: Microeconomics (Forthcoming)
We develop a framework for analyzing multi-dimensional reasoning in strategic interactions, which is motivated by two experimental findings: (a) in games with a large and complex strategy space, players tend to think in terms of strategy characteristics rather than the strategies themselves; (b) in their strategic deliberation, players consider one characteristic at a time. An MD-equilibrium is a vector of characteristics representing a stable mode of behavior: a player does not wish to modify any one characteristic. The concept is applied to several economic interactions, where a vector of characteristics, rather than a distribution of strategies, is identified as stable.
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