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Muddling Through: Moisy Equlibrium Selection

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  • Ken Binmore
  • Larry Samuelson
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    Abstract

    This paper examines an evolutionary model in which the primary source of noise that moves the model between equilibria is not arbitrarily improbvable mutations but mistakes in learning. We model strategy selection as a birth-death process, allowing us to and a simple, closed-form solution for the stationary distribution of the model even though we take the noise to be bounded away from zero. We examine equilibrium selection by considering the limiting case as the population gets large, eliminating aggregate noise from the model. Conditions are established under which the risk-dominant equilibrium in a 2 x 2 game is selected by the model as well as conditions under which the payoff-dominant equilibrium is selected.

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    File URL: ftp://ftp.repec.org/RePEc/els/esrcls/muddling.pdf
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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 036.

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    Handle: RePEc:els:esrcls:036

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    Related research

    Keywords: Equilibrium selection; Evolutionary games; Mutations; Risk dominance.;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Ken Binmore & Larry Samuelson, 1994. "Muddling Through:Noisy Equilibrium Selection," Game Theory and Information 9403005, EconWPA, revised 29 Mar 1994.
    2. G. Ellison & D. Fudenberg, 2010. "Rules of Thumb for Social Learning," Levine's Working Paper Archive 435, David K. Levine.
    3. Ellison, Glenn, 1993. "Learning, Local Interaction, and Coordination," Econometrica, Econometric Society, vol. 61(5), pages 1047-71, September.
    4. Itzhak Gilboa & David Schmeidler, 1992. "Case-Based Decision Theory," Discussion Papers 994, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    5. repec:att:wimass:9324 is not listed on IDEAS
    6. G. Noldeke & L. Samuelson, 2010. "An Evolutionary Analysis of Backward and Forward Induction," Levine's Working Paper Archive 538, David K. Levine.
    7. Blume Lawrence E., 1993. "The Statistical Mechanics of Strategic Interaction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 387-424, July.
    8. Itzhak Gilboa & David Schmeidler, 1993. "Case-Based Consumer Theory," Discussion Papers 1025, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    9. Gilboa, Itzhak & Schmeidler, David, 1996. "Case-Based Optimization," Games and Economic Behavior, Elsevier, vol. 15(1), pages 1-26, July.
    10. Fudenberg, D. & Harris, C., 1992. "Evolutionary dynamics with aggregate shocks," Journal of Economic Theory, Elsevier, vol. 57(2), pages 420-441, August.
    11. Bendor, J. & Mookherjee, D. & Ray, D., 1994. "Aspirations, Adaptive Learning and Cooperation in Reapeted Games," Papers 27, Boston University - Department of Economics.
    12. Arthur J Robson & Fernando Vega-Redondo, 1999. "Efficient Equilibrium Selection in Evolutionary Games with Random Matching," Levine's Working Paper Archive 2112, David K. Levine.
    13. Mark Bagnoli & Ted Bergstrom, 2005. "Log-concave probability and its applications," Economic Theory, Springer, vol. 26(2), pages 445-469, 08.
    14. Robson, Arthur J., 1996. "A Biological Basis for Expected and Non-expected Utility," Journal of Economic Theory, Elsevier, vol. 68(2), pages 397-424, February.
    15. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
    16. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    17. Friedman, Daniel, 1996. "Equilibrium in Evolutionary Games: Some Experimental Results," Economic Journal, Royal Economic Society, vol. 106(434), pages 1-25, January.
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