Learning Dynamics in Games with Stochastic Perturbations

Consider a generalization of fictitious play in which agents′ choices are perturbed by incomplete information about what the other side has done, variability in their payoffs, and unexplained trembles. These perturbed best reply dynamics define a nonstationary Markov process on an infinite state space. It is shown, using results from stochastic approximation theory, that for 2 × 2 games it converges almost surely to a point that lies close to a stable Nash equilibrium, whether pure or mixed. This generalizes a result of Fudenherg and Kreps, who demonstrate convergence when the game has a unique mixed equilibrium. Journal of Economic Literature Classification Numbers: 000, 000, 000.