Expectations, Drift, and Volatility in Evolutionary Games
AbstractThis paper introduces expectations into the framework of evolutionary games. On the one hand, (myopic) players are assumed to behave optimally according to the expectations they hold at each point of the process. On the other hand, expectations themselves are continuously updated according to the players' latest experience. The possibility of random drift on expectations (i.e., arbitrary variation on them not opposed by selection forces) produces sharp volatility across equilibria. Specifically, all Nash equilibria (but only these) have positive weight in the limit stationary distribution, independently of risk -or payoff-dominance considerations.
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Bibliographic InfoArticle provided by Elsevier in its journal Games and Economic Behavior.
Volume (Year): 11 (1995)
Issue (Month): 2 (November)
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Web page: http://www.elsevier.com/locate/inca/622836
Other versions of this item:
- Fernando Vega Redondo, 1994. "Expectations, drift and volatility in evolutionary games," Working Papers. Serie AD 1994-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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- Dawid, Herbert, 2000. "On the emergence of exchange and mediation in a production economy," Journal of Economic Behavior & Organization, Elsevier, vol. 41(1), pages 27-53, January.
- Weibull, Jörgen W., 1997. "What have we learned from Evolutionary Game Theory so far?," Working Paper Series 487, Research Institute of Industrial Economics, revised 26 Oct 1998.
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- Tone Dieckmann, 1998. "Stochastic Learning and the Evolution of Conventions," Constitutional Political Economy, Springer, vol. 9(3), pages 187-212, September.
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