Splitting The Baby In Two: How To Solve Solomon'S Dilemma When Agents Are Boundedly Rational
AbstractWe study the dynamic implementation of the first-best for King Solomon's Dilemma, on the assumption that boundedly rational players find their way to equilibrium using monotonic evolutionary dynamics, and also with best-reply dynamics. We find that, although the mechanisms proposed by the literature are dynamically implementable with best-reply dynamics, the same does not hold when monotonic dynamics are considered. To solve this problem, we propose an alternative mechanism, whose game-form is still implementable in the traditional sense. However, it is also dynamically implementable, as every interior path of the adjustment pro-cesses we consider converges to the first-best, which is also asymptotically stable.
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Bibliographic InfoPaper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2000-08.
Length: 17 pages
Date of creation: Mar 2000
Date of revision:
Publication status: Published by Ivie
Find related papers by JEL classification:
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
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