LEARNING IN EXTENSIVE-FORM GAMES .1. SELF-CONFIRMING EQUILIBRIA

A group of individuals repeatedly plays a fixed extensive-form game, u sing past play to forecast future actions. Each (asymptotically) maxim izes his own immediate expected payoff, believing that others' play co rresponds to the historical frequencies of past play. Because players observe only the path of play in each round, they may not learn how ot hers act in parts of the game tree that are not reached infinitely oft en. Hence, differences and correlations in beliefs about out-of-equili brium actions may persist indefinitely. The stable points of these lea rning processes are self-confirming equilibria, a weaker solution conc ept than Nash equilibria. (C) 1995 Academic Press, Inc.