LEARNING, TRACING, AND RISK DOMINANCE

This paper presents a learning process which is a generalization of th e method of fictious play of Brown. If the learning process converges, the convergence point is a Nash equilibrium. We study 2 x 2 games. He re the process always converges. The relation between the initial prio r, the weight assigned to this prior, and the equilibrium selected is examined. As the weight increases, the relation between the prior and the equilibrium selected becomes almost identical to that of the traci ng procedure of Harsanyi. In this way the learning process supports th e concept of risk dominance of Harsanyi and Selten. Journal of Economi c Literature Classification Number: C72. (C) 1994 Academic Press, Inc.