A Trade Network Game With Endogenous Partner Selection
AbstractThis paper develops a Trade Network Game (TNG) that combines evolutionary game play with endogenous partner selection. Resource- constrained buyers and sellers choose and refuse trade partners on the basis of continually updated expected payoffs. Partner selection takes place in accordance with a "deferred choice and refusal" mechanism that is shown to have interesting stability, optimality, and uniqueness properties. The iterated prisoner's dilemma strategies used by buyers and sellers to conduct their trades are evolved over time via a genetic algorithm that biases reproduction in favor of strategies that have been successful in past trades. The TNG is shown to encompass a variety of economic applications, such as job search games, labor markets modelled as assignment games, labor markets with endogenously determined workers and employers, and double auction games. To illustrate the way in which preferential partner selection interacts with game play in the TNG, resulting in the endogenous formation of trade networks, a 5-trader TNG is analyzed in detail.
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Bibliographic InfoPaper provided by Iowa State University Department of Economics in its series Economic Report with number 36.
Date of creation: May 1995
Date of revision:
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Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070
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Trade networks; evolutionary game; optimal search; endogenous interactions; iterated prisoner's dilemma; multi-armed bandit game; assignment game; preferential partner matching; genetic algorithm; artificial life; criterion filtering.;
Other versions of this item:
- Tesfatsion, Leigh, 1997. "A Trade Network Game with Endogenous Partner Selection," Staff General Research Papers 1680, Iowa State University, Department of Economics.
- C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D4 - Microeconomics - - Market Structure and Pricing
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