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Evolutionary Drift and Equilibrium Selection

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  • Ken Binmore
  • Larry Samuelson
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    Abstract

    This paper develops an approach to equilibrium selection in game theory based on studying the equilibriating 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 the same behavior on the equilibrium path, but different out-of-equilibrium behavior, appear in connected components of stationary states. The stability properties of these components often 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 suffcient condition is provided for drift to create stationary states with strong stability properties near a component of equilibria. This result is used to derive comparative static predictions concerning common questions raised in the literature on refinements of Nash equilibrium

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    Bibliographic Info

    Paper provided by ESRC Centre on Economics Learning and Social Evolution in its series ELSE working papers with number 011.

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    Handle: RePEc:els:esrcls:011

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    Related research

    Keywords: Evolutionary Games; Cheap Talk; Stability; Drift.;

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    References

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    1. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    2. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, vol. 27(2), pages 280-312, August.
    3. Ken Binmore & Larry Samuelson, 1994. "Muddling Through: Noisy Equilibrium Selection," Game Theory and Information 9410002, EconWPA.
    4. Borgers, Tilman & Sarin, Rajiv, 1997. "Learning Through Reinforcement and Replicator Dynamics," Journal of Economic Theory, Elsevier, vol. 77(1), pages 1-14, November.
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    Cited by:
    1. Stefano Demichelis & Jorgen W. Weibull, 2008. "Language, Meaning, and Games: A Model of Communication, Coordination, and Evolution," American Economic Review, American Economic Association, vol. 98(4), pages 1292-1311, September.

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