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Expectations, Animal Spirits, and Evolutionary Dynamics

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  • Angelo Antoci

    (SMU)

  • Massimiliano Landi

Abstract

We consider a (deterministic) evolutionary model where players have dynamic expectations about the strategy distribution. We provide a global analysis of the co-evolution of play and expectations for a generic two{by{two game. Besides the the typical indeterminacy of the evolutionary dynamics, we find some other ones : for any initial strategy configuration the dynamics can converge to any asymptotically stable fixed point, for different initial values of the expectations. Moreover, starting from the same initial pair of strategy configuration and values of expectations, the dynamics may lead to different asymptotically stable fixed points for different parameters of the expectations.

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Bibliographic Info

Paper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 22057.

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Date of creation: Jan 2006
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Handle: RePEc:eab:macroe:22057

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Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200
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Keywords: evolutionary games; dynamic systems; animal spirits;

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  1. Fudenberg, Drew & Diamond, Peter, 1989. "Rational Expectations Business Cycles in Search Equilibrium," Scholarly Articles 3374509, Harvard University Department of Economics.
  2. Matsui Akihiko & Matsuyama Kiminori, 1995. "An Approach to Equilibrium Selection," Journal of Economic Theory, Elsevier, vol. 65(2), pages 415-434, April.
  3. John Conlisk, 2001. "Costly Predation and the Distribution of Competence," American Economic Review, American Economic Association, vol. 91(3), pages 475-484, June.
  4. Lagunoff, Roger, 2000. "On the Evolution of Pareto-Optimal Behavior in Repeated Coordination Problems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 273-93, May.
  5. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
  6. Burdzy, Krzysztof & Frankel, David M & Pauzner, Ady, 2001. "Fast Equilibrium Selection by Rational Players Living in a Changing World," Econometrica, Econometric Society, vol. 69(1), pages 163-89, January.
  7. Matsui, Akihiko & Oyama, Daisuke, 2006. "Rationalizable foresight dynamics," Games and Economic Behavior, Elsevier, vol. 56(2), pages 299-322, August.
  8. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-66, May.
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