Review of Economic Studies Vol. 93 No. 2 2026
Endogenous Clustering and Analogy-Based Expectation Equilibrium
Abstract
Normal-form two-player games are categorized by players into K analogy classes so as to minimize the prediction error about the behaviour of the opponent. This results in Clustered Analogy-Based Expectation Equilibria in which strategies are analogy-based expectation equilibria given the analogy partitions and analogy partitions minimize the prediction errors given the strategies. We distinguish between environments with self-repelling analogy partitions in which some mixing over partitions is required and environments with self-attractive partitions in which several analogy partitions can arise, thereby suggesting new channels of belief heterogeneity and equilibrium multiplicity. Various economic applications are discussed.
- DOI
- 10.1093/restud/rdaf054
- Volume
- 93
- Issue
- 2
- Pages
- 1077-1102
- Language
- en
- Sources
- openalex crossref