2012/05 | LEM Working Paper Series | |
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A Dynamical Approach to Conflict Analysis |
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Sebastian Ille |
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Keywords | ||
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Game Theory, Repeated Games, Computational Methods, Non-Nash Equilibria, Dominated Strategies
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JEL Classifications | ||
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C62, C65, D74, D83, D84
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Abstract | ||
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The Conflict Analysis approach by Hipel and Fraser (1984) is well
equipped to model repeated games. Players are assumed to posses a
sequential reasoning that allows them to ( not necessarily correctly)
anticipate the reaction of other players to their strategies. An
individual?s best response strategy is thus defined based on this
projection, adding additional stability conditions to strategic choice
and increasing the set of potential equilibria beyond pure Nash
equilibria. Yet, the original Conflict Analysis approach lacks the
ability to genuinely model dynamic repeated games, in which past play
defines the condition for future interactions. This article will
illustrate how the original model can be adapted to include endogenous
individual preferences that are defined by the strategic choice of
players during past play, allowing to model the reciprocal connection
between preferential change and best response play in repeated
games. A dummy game serves as an exemplar and helps to visualise the
results obtained from this extension.
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Downloads | ||
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