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, 1997. "Learning of equilibria by a population with minimal information," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 1-18, January.
- Susan Lee, 1999. "Assortative Interactions and Endogenous Stratification," Working Papers 99-08-056, Santa Fe Institute.
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- Tone Dieckmann, 1997. "The Evolution of conventions with Mobile Players," Economics, Finance and Accounting Department Working Paper Series n720897, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
- 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.
- Dieckmann, Tone, 1999. "The evolution of conventions with mobile players," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 93-111, January.
- 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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