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Imitation, local interaction, and coordination

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  • Hsiao-Chi Chen

    ()

  • Yunshyong Chow

    ()

  • Li-Chau Wu

    ()

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    Abstract

    This paper analyzes players’ long-run behavior in evolutionary coordination games with imitation and one-dimensional local interaction. Players are assumed to interact with their two neighbors and to imitate actions with the highest average payoffs. We find that the payoff-dominant equilibrium survives in the long run with positive probability. The results derive the conditions under which both risk-dominant-strategy and payoff-dominant-strategy takers co-exist in the long run. The risk-dominant equilibrium is the unique long-run equilibrium for the remaining cases. This study extends and complements the analyses of Eshel et al. (Am Econ Rev 88:157–179, 1998 ) and Vega-Redondo (Evolution, games, and economic behaviour, 1996 ). Combining Alós-Ferrer and Weidenholzer’s (Econ Lett 93:163–168, 2006 ; J Econ Theory 14:251–274, 2008 ) and our results, we conclude that players’ long-run behavior varies with imitation rules and information collecting modes. Finally, we show the convergence rate to all the long-run equilibria. Copyright Springer-Verlag Berlin Heidelberg 2013

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    Bibliographic Info

    Article provided by Springer in its journal International Journal of Game Theory.

    Volume (Year): 42 (2013)
    Issue (Month): 4 (November)
    Pages: 1041-1057

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    Handle: RePEc:spr:jogath:v:42:y:2013:i:4:p:1041-1057

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    Related research

    Keywords: Coordination game; Imitation; Local interaction; C72; C73; D83;

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    References

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    1. Bergin, James & Lipman, Barton L, 1996. "Evolution with State-Dependent Mutations," Econometrica, Econometric Society, Econometric Society, vol. 64(4), pages 943-56, July.
    2. Fudenberg, Drew & Ellison, Glenn, 1995. "Word-of-Mouth Communication and Social Learning," Scholarly Articles 3196300, Harvard University Department of Economics.
    3. Ahmed Anwar, 2004. "On the Co-Existence of Conventions," ESE Discussion Papers 68, Edinburgh School of Economics, University of Edinburgh.
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    12. Ellison, Glenn, 2000. "Basins of Attraction, Long-Run Stochastic Stability, and the Speed of Step-by-Step Evolution," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 67(1), pages 17-45, January.
    13. Blume Lawrence E., 1993. "The Statistical Mechanics of Strategic Interaction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 387-424, July.
    14. Glen Ellison, 2010. "Learning, Local Interaction, and Coordination," Levine's Working Paper Archive 391, David K. Levine.
    15. Jeffrey C. Ely, 2002. "Local Conventions," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 1349, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    16. Alos-Ferrer, Carlos & Weidenholzer, Simon, 2006. "Imitation, local interactions, and efficiency," Economics Letters, Elsevier, vol. 93(2), pages 163-168, November.
    17. Ely Jeffrey C, 2002. "Local Conventions," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 2(1), pages 1-32, May.
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    Cited by:
    1. Cui, Zhiwei, 2014. "More neighbors, more efficiency," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 40(C), pages 103-115.

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