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Economic Darwinism

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  • Birgitte Sloth

    (Department of Business and Economics, University of Southern Denmark)

  • Hans Jørgen Whitta-Jacobsen

    (Department of Economics, University of Copenhagen)

Abstract

We define an evolutionary process of “economic Darwinism” for playing-the-field, symmetric games. The process captures two forces. One is “economic selection”: if current behavior leads to payoff differences, behavior yielding lowest payoff has strictly positive probability of being replaced by an arbitrary behavior. The other is “mutation”: any behavior has at any point in time a strictly positive, very small probability of shifting to an arbitrary behavior. We show that behavior observed frequently is in accordance with “evolutionary equilibrium”, a static equilibrium concept suggested in the literature. Using this result, we demonstrate that generally under positive (negative) externalities, economic Darwinism implies even more under- (over-) activity than does Nash equilibrium.

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Bibliographic Info

Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2006-01.

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Length: 23 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:kud:kuieci:2006-01

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Keywords: evolutionary game theory; Darwinian evolution; economic selection; mutation; evolutionary equilibrium; stochastic stability;

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  1. Bergin, James & Bernhardt, Dan, 2009. "Cooperation through imitation," Games and Economic Behavior, Elsevier, vol. 67(2), pages 376-388, November.
  2. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  3. Fernando Vega-Redondo, 1997. "The Evolution of Walrasian Behavior," Econometrica, Econometric Society, vol. 65(2), pages 375-384, March.
  4. Alex Possajennikov, 2001. "Evolutionary Foundations of Aggregate-Taking Behavior," Discussion Papers in Economics 01_10, University of Dortmund, Department of Economics.
  5. Carlos Alós-Ferrer & Ana Ania, 2005. "The evolutionary stability of perfectly competitive behavior," Economic Theory, Springer, vol. 26(3), pages 497-516, October.
  6. Burkhard C. Schipper, 2004. "Submodularity and the evolution of Walrasian behavior," International Journal of Game Theory, Springer, vol. 32(4), pages 471-477, 08.
  7. Corchon, Luis C., 1994. "Comparative statics for aggregative games the strong concavity case," Mathematical Social Sciences, Elsevier, vol. 28(3), pages 151-165, December.
  8. James Bergin & Dan Bernhardt, 2004. "Comparative Learning Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 45(2), pages 431-465, 05.
  9. Stegeman, Mark & Rhode, Paul, 2004. "Stochastic Darwinian equilibria in small and large populations," Games and Economic Behavior, Elsevier, vol. 49(1), pages 171-214, October.
  10. Schaffer, Mark E., 1989. "Are profit-maximisers the best survivors? : A Darwinian model of economic natural selection," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 29-45, August.
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