SITE Working Paper Series,
Stockholm School of Economics, Stockholm Institute of Transition Economics

Abstract: This paper introduces the payoff-confirming analogy-based expectation equilibrium (PCABEE) as a way to refine the set of analogy-based equilibria and the associated admissible analogy partitions. In addition to the actions of others, own payoff history provides information about others’ strategies but, yet, non-Bayesian Nash equilibria may exist both with an incorrect and a correct prior. We provide general conditions when this happens. Two stylized employer-employee interactions, one with a correct and one with an incorrect prior, are provided illustrating how PCABEE can be used to analyze robust stereotypes and how incorrect such stereotypes may lead to discrimination.

Keywords: analogy expectations; bounded rationality; curse; learning; discrimination; stereotypes

JEL-codes: C72; D82

31 pages, December 28, 2009

Full text files

hasite0007.pdf  Full text

Download statistics

• Stockholm School of Economics, Stockholm Institute of Transition Economics
• Ordering Working Papers
• Instructions for Authors
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Dominick Nilsson ()
Report other problems with accessing this service to Sune Karlsson ().

This page generated on 2024-02-05 17:11:26.