Higher-Order Misspecification and Equilibrium Stability

Murooka, Takeshi; Yamamoto, Yuichi

Higher-Order Misspecification and Equilibrium Stability

Murooka, Takeshi; Yamamoto, Yuichi

OSIPP Discussion Paper, 2023, DP-2023-E-002-Rev, 1-88

アクセス数:683件（2025-10-10 20:13 集計）

固定URL: https://hdl.handle.net/11094/92438

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タイトル	Higher-Order Misspecification and Equilibrium Stability
著者	NRID 1000010796345 1000010796345 researchmap permalink takeshimurooka takeshimurooka Scopus Author ID 37079438400 37079438400 著者名 Murooka, Takeshi
著者	NRID 1000040855178 1000040855178 著者名 Yamamoto, Yuichi
キーワード等	model misspecification
	learning
	unawareness
	convergence
	stability
	inferential naivety
	overconfidence
内容	*Revised：[DP-2023-E-002, August 2]
抄録	This paper considers a Bayesian learning problem where strategic players jointly learn an unknown economic state, and show that one's higher-order misspecification (i.e., one's misspecification about the opponent's misspecification) can have a significant impact on the equilibrium outcome. We consider a simple environmental problem where players' production, as well as an unknown state, affects the quality of the environment. Crucially, we assume that one of the players is unrealistically optimistic about the quality of the environment. When this optimism is common knowledge, the equilibrium outcome is continuous in the amount of optimism, and hence small optimism leads to approximately correct learning of the state. In contrast, when the optimism is not common knowledge and each player is unaware of the opponent having a different view about the world, the equilibrium outcome is discontinuous, and even vanishingly small optimism leads to completely incorrect learning. We then analyze a general Bayesian learning model and discuss when such discontinuity arises.
出版者	Osaka School of International Public Policy, Osaka University
収録物名	OSIPP Discussion Paper
巻(号)	DP-2023-E-002-Rev
ページ	1-88
刊行年月	2023-09-04
言語	英語
ハンドルURL	https://hdl.handle.net/11094/92438
関連情報 (references)	URI https://www.osipp.osaka-u.ac.jp/archives/DP/2023/DP2023E002Rev.pdf
アクセス権	metadata only access
カテゴリ	ディスカッション／ワーキング・ペーパー DP/WP
カテゴリ	OSIPP Discussion Paper
最終更新日	2023-09-04

資源タイプ	テクニカルレポート
ローカル資源タイプ	ディスカッション／ワーキング・ペーパー
DCMI資源タイプ	text
DCTERMS.bibliographicCitation	OSIPP Discussion Paper. 2023, DP-2023-E-002-Rev, p. 1-88
DC.title	Higher-Order Misspecification and Equilibrium Stability
DC.creator	Murooka, Takeshi
DC.creator	Yamamoto, Yuichi
DC.publisher	Osaka School of International Public Policy, Osaka University
DC.language' scheme='DCTERMS.RFC1766	英語
DC.type' scheme='DCTERMS.DCMIType	text
DCTERMS.issued' scheme='DCTERMS.W3CDTF	2023-09-04
DC.relation' scheme='DCTERMS.URI	https://www.osipp.osaka-u.ac.jp/archives/DP/2023/DP2023E002Rev.pdf
DC.subject	model misspecification
	learning
	unawareness
	convergence
	stability
	inferential naivety
	overconfidence
DC.description	*Revised：[DP-2023-E-002, August 2]
DCTERMS.abstract	This paper considers a Bayesian learning problem where strategic players jointly learn an unknown economic state, and show that one's higher-order misspecification (i.e., one's misspecification about the opponent's misspecification) can have a significant impact on the equilibrium outcome. We consider a simple environmental problem where players' production, as well as an unknown state, affects the quality of the environment. Crucially, we assume that one of the players is unrealistically optimistic about the quality of the environment. When this optimism is common knowledge, the equilibrium outcome is continuous in the amount of optimism, and hence small optimism leads to approximately correct learning of the state. In contrast, when the optimism is not common knowledge and each player is unaware of the opponent having a different view about the world, the equilibrium outcome is discontinuous, and even vanishingly small optimism leads to completely incorrect learning. We then analyze a general Bayesian learning model and discuss when such discontinuity arises.
DC.format	92438
citation_title	Higher-Order Misspecification and Equilibrium Stability
citation_author	Murooka, Takeshi
citation_author	Yamamoto, Yuichi
citation_publisher	Osaka School of International Public Policy, Osaka University
citation_language	英語
citation_date	2023-09-04
citation_journal_title	OSIPP Discussion Paper
citation_volume	DP-2023-E-002-Rev
citation_firstpage	1
citation_lastpage	88
citation_public_url	https://hdl.handle.net/11094/92438
citation_abstract_html_url	https://www.osipp.osaka-u.ac.jp/archives/DP/2023/DP2023E002Rev.pdf

Higher-Order Misspecification and Equilibrium Stability

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