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Equilibrium Selection under Different Learning Modes in Supermodular Games

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Author Info
Oddvar M. Kaarboe (University of Bergen)
Alexander F. Tieman () (Vrije Universiteit Amsterdam)

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Abstract

We apply the dynamic stochastic framework proposed by recent evolutionary literature to the class of strict supermodular games when two simple behavior rules coexist in the population, imitation and myopic optimization. We assume that myopic optimizers are able to see how well their payoff does relative to what they can get in the stage game and therefore experiment more in low payoff states. A clear-cut equilibrium selection result is obtained: the payoff dominant equilibrium emerges as the unique long run equilibrium. Furthermore, the expected waiting time until the payoff dominant equilibrium is reached is relatively short, even in the limit as the population size grows large.

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Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 99-061/1.

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Date of creation: 11 Aug 1999
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Handle: RePEc:dgr:uvatin:19990061

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Related research
Keywords: Evolution; Imitation; Myopic Optimization; Payoff Dominant Equilibrium;

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  1. Kandori Michihiro & Rob Rafael, 1995. "Evolution of Equilibria in the Long Run: A General Theory and Applications," Journal of Economic Theory, Elsevier, vol. 65(2), pages 383-414, April. [Downloadable!] (restricted)
  2. Bergin, James & Lipman, Barton L, 1996. "Evolution with State-Dependent Mutations," Econometrica, Econometric Society, vol. 64(4), pages 943-56, July. [Downloadable!] (restricted)
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  3. 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.
  4. Robles, Jack, 1998. "Evolution with Changing Mutation Rates," Journal of Economic Theory, Elsevier, vol. 79(2), pages 207-223, April. [Downloadable!] (restricted)
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  5. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September. [Downloadable!] (restricted)
  6. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321. [Downloadable!] (restricted)
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  7. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. [Downloadable!] (restricted)
  8. Robson, Arthur J. & Vega-Redondo, Fernando, 1996. "Efficient Equilibrium Selection in Evolutionary Games with Random Matching," Journal of Economic Theory, Elsevier, vol. 70(1), pages 65-92, July. [Downloadable!] (restricted)
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  1. Oddvar M. Kaarbøe & Alexander F. Tieman, 1999. "Equilibrium Selection in Games with Macroeconomic Complementarities," Tinbergen Institute Discussion Papers 99-096/1, Tinbergen Institute. [Downloadable!]
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  2. Burkhard C. Schipper, 2005. "Imitators and Optimizers in Cournot Oligopoly," Discussion Papers 53, SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich. [Downloadable!]
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