Evolutionary Drift and Equilibrium Selection
AbstractThis paper develops an approach to equilibrium selection in game theory based on studying the learning process through which equilibrium is achieved. The differential equations derived from models of interactive learning typically have stationary states that are not isolated. Instead, Nash equilibria that specify different out-of- equilibrium behavior appear in connected components of stationary states. The stability properties of these components can depend critically on the perturbations to which the system is subjected. We argue that it is then important to incorporate such drift into the model. A sufficient condition is provided for drift to create stationary states, with strong stability properties, near a component of equilibria. Applications to questions of forward and backward induction are developed.
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Bibliographic InfoPaper provided by Wisconsin Madison - Social Systems in its series Working papers with number 9529.
Length: 42 pages
Date of creation: 1995
Date of revision:
Contact details of provider:
Postal: UNIVERSITY OF WISCONSIN MADISON, SOCIAL SYSTEMS RESEARCH INSTITUTE(S.S.R.I.), MADISON WISCONSIN 53706 U.S.A.
GENERAL EQUILIBRIUM; GAMES; ECONOMIC COOPERATION;
Other versions of this item:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- C79 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Other
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