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Muddling Through: Noisy Equilibrium Selection

Author

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  • Ken Binmore

    (University College London)

  • Larry Samuelson

    (University of Wisconsin)

Abstract

We examine an evolutionary model in which the primary source of "noise" that moves the model between equilibria is not random, arbitrarily improbable mutations but mistakes in learning. We find conditions under which the payoff-dominant equilibrium in a 2x2 game is selected by the model as well as conditions under which the risk-dominant equlibrium is selected. The relevant risk-dominance considerations, however, arise not in the original game but in a "fitness game" derived from the process by which payoffs in the original game are translated into evolutionary fitnesses. We also find that waiting times until the limiting distribution is reached can be shorter than in a mutation-driven model. To explore the robustness of the results to the specification of the model, we present a number of comparative static results as well as a "two-tiered" evolutionary model in which the rules by which agents learn to play the game are themselves subject to evolutionary pressure.

Suggested Citation

  • Ken Binmore & Larry Samuelson, 1994. "Muddling Through: Noisy Equilibrium Selection," Game Theory and Information 9410002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpga:9410002
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    References listed on IDEAS

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    1. Mark Bagnoli & Ted Bergstrom, 2006. "Log-concave probability and its applications," Studies in Economic Theory, in: Charalambos D. Aliprantis & Rosa L. Matzkin & Daniel L. McFadden & James C. Moore & Nicholas C. Yann (ed.), Rationality and Equilibrium, pages 217-241, Springer.
    2. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-1071, September.
    3. Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September.
    4. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    5. Binmore, K. & Samuelson, L., 1993. "An Economist's Perspective on the Evolution of Norms," Working papers 9323, Wisconsin Madison - Social Systems.
    6. Gilboa, Itzhak & Schmeidler, David, 1996. "Case-Based Optimization," Games and Economic Behavior, Elsevier, vol. 15(1), pages 1-26, July.
    7. Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 612-643, August.
    8. Noldeke Georg & Samuelson Larry, 1993. "An Evolutionary Analysis of Backward and Forward Induction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 425-454, July.
    9. Binmore, K. & Samuelson, L. & Vaughan, R., 1993. "Musical Chairs: Modelling Noisy Evolution," Working papers 9324, Wisconsin Madison - Social Systems.
    10. Binmore, Ken & Samuelson, Larry, 1993. "An Economist's Perspective On The Evolution Of Norms," SSRI Workshop Series 292698, University of Wisconsin-Madison, Social Systems Research Institute.
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    Citations

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    Cited by:

    1. Robson, Arthur J. & Vega-Redondo, Fernando, 1996. "Efficient Equilibrium Selection in Evolutionary Games with Random Matching," Journal of Economic Theory, Elsevier, vol. 70(1), pages 65-92, July.
    2. Maruta, Toshimasa, 1997. "On the Relationship between Risk-Dominance and Stochastic Stability," Games and Economic Behavior, Elsevier, vol. 19(2), pages 221-234, May.
    3. Kirchkamp, Oliver, 1999. "Simultaneous evolution of learning rules and strategies," Journal of Economic Behavior & Organization, Elsevier, vol. 40(3), pages 295-312, November.
    4. Angelo Antoci & Pier Sacco, 1995. "A public contracting evolutionary game with corruption," Journal of Economics, Springer, vol. 61(2), pages 89-122, June.
    5. Hopkins, Ed, 1999. "Learning, Matching, and Aggregation," Games and Economic Behavior, Elsevier, vol. 26(1), pages 79-110, January.
    6. Jonathan Bendor & Piotr Swistak, 1998. "Evolutionary Equilibria: Characterization Theorems and Their Implications," Theory and Decision, Springer, vol. 45(2), pages 99-159, October.
    7. Dieckmann, Tone, 1999. "The evolution of conventions with mobile players," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 93-111, January.
    8. Tone Dieckmann, 1997. "The Evolution of conventions with Mobile Players," Economics Department Working Paper Series n720897, Department of Economics, National University of Ireland - Maynooth.

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    More about this item

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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