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Evolutionary Drift and Equilibrium Selection

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Author Info
Binmore, Ken
Samuelson, Larry
Abstract

This paper develops an approach to equilibrium selection in game theory based on studying the learning process through which equilibrium is achieved. The differential equations derived from models of interactive learning typically have stationary states that are not isolated. Instead, Nash equilibria that specifies different out-of-equilibrium behavior appear in connected components of stationary states. The stability properties of these components can depend critically on the perturbations to which the system is subjected. The authors argue that it is then important to incorporate such drift into the model. A sufficient condition is provided for drift to create stationary states, with strong stability properties, near a component of equilibria. Applications to questions of forward and backward induction are developed. Copyright 1999 by The Review of Economic Studies Limited.

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Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 66 (1999)
Issue (Month): 2 (April)
Pages: 363-93
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Handle: RePEc:bla:restud:v:66:y:1999:i:2:p:363-93

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  4. Poulsen, Anders, 2002. "On the Evolutionary Stability of Bargaining Inefficiency," Working Papers 02-5, University of Aarhus, Aarhus School of Business, Department of Economics. [Downloadable!]
  5. Esther Hauk & Sjaak Hurkens, 1999. "On Forward Induction and Evolutionary and Strategic Stability," Economics Working Papers 408, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 1999. [Downloadable!]
  6. Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 1999. "Stochastic Game Theory: Adjustment to Equilibrium Under Noisy Directional Learning," Virginia Economics Online Papers 327, University of Virginia, Department of Economics. [Downloadable!]
  7. Mauro Caminati & Alessandro Innocenti & Roberto Ricciuti, 2008. "Drift and equilibrium selection with human and computer players," Economics Bulletin, Economics Bulletin, vol. 3(19), pages 1-7. [Downloadable!]
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  13. Ed Hopkins, 2004. "Two Competing Models of How People Learn in Games," ESE Discussion Papers 51, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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  14. Antonio Cabrales & Jose Ramon Uriarte, 2008. "Doubts and equilibria," Economics Working Papers we080905, Universidad Carlos III, Departamento de Economía. [Downloadable!]
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  15. Josef Hofbauer & Ed Hopkins, 2004. "Learning in Perturbed Asymmetric Games," ESE Discussion Papers 53, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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  16. Weibull, Jörgen & Salomonsson, Marcus, 2005. "Natural selection and social preferences," Working Paper Series in Economics and Finance 588, Stockholm School of Economics, revised 20 Jul 2005.
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  18. Engseld, Peter & Bergh, Andreas, 2005. "Choosing Opponents in Prisoners' Dilemma: An Evolutionary Analysis," Working Papers 2005:45, Lund University, Department of Economics. [Downloadable!]
  19. Josef Hofbauer & William H. Sandholm, 2001. "Evolution and Learning in Games with Randomly Disturbed Payoffs," Vienna Economics Papers 0205, University of Vienna, Department of Economics. [Downloadable!]
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  20. Alessandro Innocenti & Mauro Caminati & Roberto Ricciuti, 2003. "Drift effect and timing without observability: experimental evidence," Department of Economics University of Siena 405, Department of Economics, University of Siena. [Downloadable!]
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