Deep and shallow thinking in the long run

Heinrich Harald Nax, Jonathan Newton

Humans differ in their strategic reasoning abilities and in beliefs about others' strategic reasoning abilities. Studying such cognitive hierarchies has produced new insights regarding equilibrium analysis in economics. This paper investigates the effect of cognitive hierarchies on long run behavior. Despite short run behavior being highly sensitive to variation in strategic reasoning abilities, this variation is not replicated in the long run. In particular, when generalized risk dominant strategy profiles exist, they emerge in the long run independently of the strategic reasoning abilities of players. These abilities may be arbitrarily low or high, heterogeneous across players, and evolving over time.

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Year of publication:	2022
Authors:	Nax, Heinrich Harald ; Newton, Jonathan
Published in:	Theoretical economics : TE ; an open access journal in economic theory. - Toronto : [Verlag nicht ermittelbar], ISSN 1555-7561, ZDB-ID 2220447-7. - Vol. 17.2022, 4, p. 1501-1527
Subject:	Bounded rationality \| evolution \| level k thinking \| Begrenzte Rationalität \| Theorie \| Theory \| Evolutionsökonomik \| Evolutionary economics \| Kognition \| Cognition

Type of publication:	Article
Type of publication (narrower categories):	Aufsatz in Zeitschrift ; Article in journal
Language:	English
Other identifiers:	10.3982/TE4824 [DOI] hdl:10419/296391 [Handle]
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10013472490