Working Papers 2001 – Abstracts

Strategy Similarity and Coordination

Rajiv Sarin and Farshid Vahid

This paper introduces similarity among strategies in the payoff assessment model of choice (Sarin and Vahid (1999, GEB)). The assessments of strategies that are more similar to the chosen strategy are updated more similarly to the chosen strategy. We use this model to explain a recent experiment. The coordination game repeatedly played by the experimental subjects had two symmetric, efficient and strict stage game Nash equilibria. In the experiment, the subjects always converged to play one of these equilibria, and converged to this equilibrium remarkably fast. The model we propose converges to choose the same equilibrium, and does so in roughly the same number of repetitions. Statistical tests cannot distinguish between the choice distributions generated by the model and the observed choice distributions in almost every period.

Keywords: Econometric analysis of experimental data, Adaptive learning, Similarity, Coordination games, Payoff assessments without probabilities.

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