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Muddling Through : Noisy Equilibrium Section

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Author Info

  • Binmore, K.
  • samuelson, L.

Abstract

We examine an evolutionary model in which the primary source of "noise" that moves the model between equilibria is not random, arbitrarily improbable mutations but mistakes in learning. We find conditions under which the payoff-dominant equilibrium in a 2x2 game is selected by the model as well as conditions under which the risk- dominant equilibrium is selected. The relevant risk-dominance considerations, however, arise not in the original game but in a "fitness game" derived from the process by which payoffs in the original game are translated into evolutionary fitnesses. We also find that waiting times until the limiting distribution is reached can be shorter than in a mutation-driven model. To explore the robustness of the results to the specification of the model, we present a number of comparative static results as well as a "two-tiered" evolutionary model in which the rules by which agents learn to play the game are themselves subject to evolutionary pressure.

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Bibliographic Info

Paper provided by Wisconsin Madison - Social Systems in its series Working papers with number 9410r.

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Length: 37 pages
Date of creation: 1996
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Handle: RePEc:att:wimass:9410r

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Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.

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Keywords: GAME THEORY; RISK;

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References

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  1. Allison, G. & Fudenberg, D., 1992. "Rules of Thumb for Social Learning," Working papers 92-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Bagnoli, M. & Bergstrom, T., 1989. "Log-Concave Probability And Its Applications," Papers 89-23, Michigan - Center for Research on Economic & Social Theory.
  3. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September.
  4. G. Noldeke & L. Samuelson, 2010. "An Evolutionary Analysis of Backward and Forward Induction," Levine's Working Paper Archive 538, David K. Levine.
  5. Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September.
  6. repec:att:wimass:9324 is not listed on IDEAS
  7. Itzhak Gilboa & David Schmeidler, 1993. "Case-Based Optimization," Discussion Papers 1039, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  8. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  9. repec:att:wimass:9323 is not listed on IDEAS
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