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Adaptive play by idiosyncratic agents

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  • Myatt, David P.
  • Wallace, Chris C.

Abstract

Equilibrium selection in coordination games has generated a large literature. Kandori, Mailath and Rob (1993) and Young (1993) studied dynamic models of aggregate behaviour in which agents choose best responses to observations of population play. Crucially, infrequent mistakes (`mutations`) allow agents to take actions contrary to current trends and prevent initial configurations from determining long run play. An alternative approach is offered here: Harsanyian trembles are added to agents` payoffs so that with some probability it is optimal to act against the flow of play. The long run distribution of population behaviour is characterised - modes correspond to stable Bayesian Nash equilibria. Allowing the variance of payoff trembles to vanish, via a purification process, a single equilibrium is played almost always in the long run. Kandori et al and Young show that the number of contrarian actions required to escape an equilibrium determines selection; here, the likelihood that such actions are taken is of equal importance.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 48 (2004)
Issue (Month): 1 (July)
Pages: 124-138

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Handle: RePEc:eee:gamebe:v:48:y:2004:i:1:p:124-138

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Web page: http://www.elsevier.com/locate/inca/622836

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  1. Damme, E.E.C. van & Weibull, J., 1998. "Evolution with Mutations Driven by Control Costs," Discussion Paper 1998-94, Tilburg University, Center for Economic Research.
  2. J Bergin & B L Lipman, 1997. "Evolution with state-dependent Mutations," Levine's Working Paper Archive 771, David K. Levine.
  3. Brock,W.A. & Durlauf,S.N., 2000. "Discrete choice with social interactions," Working papers 7, Wisconsin Madison - Social Systems.
  4. Binmore, Ken & Samuelson, Larry, 1997. "Muddling Through: Noisy Equilibrium Selection," Journal of Economic Theory, Elsevier, vol. 74(2), pages 235-265, June.
  5. repec:fth:iniesr:501 is not listed on IDEAS
  6. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  7. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
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Cited by:
  1. David P. Myatt & Chris Wallace, 2002. "A Multinomial Probit Model of Stochastic Evolution," Economics Series Working Papers 90, University of Oxford, Department of Economics.
  2. N. Williams, 2002. "Stability and Long Run Equilibrium in Stochastic Fictitious Play," Princeton Economic Theory Working Papers cbeeeb49cc8afc83f125df5a8, David K. Levine.
  3. Thomas Norman, 2003. "The Evolution of Conflict under Inertia," Economics Series Working Papers 2003-W07, University of Oxford, Department of Economics.
  4. Thomas Norman, 2003. "The Evolution of Coordination under Inertia," Economics Series Working Papers 2003-W06, University of Oxford, Department of Economics.
  5. Tom Quilter, 2007. "Noise Matters in Heterogeneous Populations," ESE Discussion Papers 169, Edinburgh School of Economics, University of Edinburgh.
  6. Neary, Philip R., 2012. "Competing conventions," Games and Economic Behavior, Elsevier, vol. 76(1), pages 301-328.
  7. Thomas Norman, 2010. "Cycles versus equilibrium in evolutionary games," Theory and Decision, Springer, vol. 69(2), pages 167-182, August.
  8. Norman, Thomas W.L., 2009. "Rapid evolution under inertia," Games and Economic Behavior, Elsevier, vol. 66(2), pages 865-879, July.
  9. Thomas Norman, 2003. "Step-by-Step Evolution with State-Dependent Mutations," Economics Series Working Papers 2003-W08, University of Oxford, Department of Economics.

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