How Complex are Networks Playing Repeated Games?

Posted: 5 Jan 1999

See all articles by In-Koo Cho

In-Koo Cho

University of Illinois at Urbana-Champaign

Hao Li

University of Toronto - Department of Economics; Queen's University - Department of Economics

Abstract

This paper examines implications of complexity cost in implementing repeated game strategies through networks with finitely many classifiers. A network consists of individual classifiers that summarize the history of repeated play according to a weighted sum of the empirical frequency of the outcomes of the stage game, and a decision unit that chooses an action in each period based on the summaries of the classifiers. Each player maximizes his long run average payoff, while minimizing the complexity cost of implementing his strategy through a network, measured by its number of classifiers. We examine locally stable equilibria where the selected networks are robust against small perturbations. In any locally stable equilibrium, no player uses a network with more than a single classifier. Moreover, the set of locally stable equilibrium payoff vectors lies on two line segments in the payoff space of the stage game.

JEL Classification: C72

Suggested Citation

Cho, In-Koo and Li, Hao, How Complex are Networks Playing Repeated Games?. Economic Theory, Vol. 13, Iss. 1, 1999. Available at SSRN: https://ssrn.com/abstract=142442

In-Koo Cho (Contact Author)

University of Illinois at Urbana-Champaign ( email )

410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States

Hao Li

University of Toronto - Department of Economics ( email )

150 St. George Street
Toronto, Ontario M5S 3G7
Canada
416-978-5105 (Phone)

Queen's University - Department of Economics ( email )

Dunning Hall
Kingston, Ontario K7L 3N6
Canada
613-533-2275 (Phone)
613-533-6668 (Fax)

HOME PAGE: http://www.econ.queensu.ca/pub/faculty/li/

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