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Imitators and Optimizers in a Changing Environment

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  • Burkhard Hehenkamp
  • Oddvar Kaarbøe

Abstract

We analyze the dynamic interaction between imitators and optimizers in a changing world. To this end, we put forward a symmetric duopoly game of strategic substitutes where players interact repeatedly in a world of demand- and cost-uncertainty. If the environment changes every period, the process converges globally to a unique two-period cycle where the optimizer has highest payoff every period. As to the general stochastic case, we characterize the long-run average per-period payoff for the optimizer and the imitator respectively as a function of the environmental switching probabilities. It turns out that the imitator experiences selection pressure for a large range of switching probabilities.

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Bibliographic Info

Paper provided by University of Dortmund, Department of Economics in its series Discussion Papers in Economics with number 02_01.

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Length: 31 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:mik:wpaper:02_01

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  1. Droste, Edward & Hommes, Cars & Tuinstra, Jan, 2002. "Endogenous fluctuations under evolutionary pressure in Cournot competition," Games and Economic Behavior, Elsevier, vol. 40(2), pages 232-269, August.
  2. Kandori, Michihiro & Mailath, George J & Rob, Rafael, 1993. "Learning, Mutation, and Long Run Equilibria in Games," Econometrica, Econometric Society, vol. 61(1), pages 29-56, January.
  3. Gale, Douglas & Rosenthal, Robert W., 2001. "Experimentation, Imitation, and Stochastic Stability: Addendum," Journal of Economic Theory, Elsevier, vol. 97(1), pages 164-174, March.
  4. Fernando Vega Redondo, 1996. "The evolution of walrasian behavior," Working Papers. Serie AD 1996-05, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  5. Gale, Douglas & Rosenthal, Robert W., 1999. "Experimentation, Imitation, and Stochastic Stability," Journal of Economic Theory, Elsevier, vol. 84(1), pages 1-40, January.
  6. Schenk-Hoppe, Klaus Reiner, 2000. "The evolution of Walrasian behavior in oligopolies," Journal of Mathematical Economics, Elsevier, vol. 33(1), pages 35-55, February.
  7. Conlisk, John, 1980. "Costly optimizers versus cheap imitators," Journal of Economic Behavior & Organization, Elsevier, vol. 1(3), pages 275-293, September.
  8. Rhode, Paul & Stegeman, Mark, 2001. "Non-Nash equilibria of Darwinian dynamics with applications to duopoly," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 415-453, March.
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Cited by:
  1. Burkhard C. Schipper, 2005. "Imitators and Optimizers in Cournot oligopoly," Working Papers 537, University of California, Davis, Department of Economics.
  2. Duersch, Peter & Oechssler, Jörg & Schipper, Burkhard C., 2012. "Once Beaten, Never Again: Imitation in Two-Player Potential Games," Working Papers 0529, University of Heidelberg, Department of Economics.
  3. Josephson, Jens, 2001. "Stochastic Adaptation in Finite Games Played by Heterogeneous Populations," Working Paper Series in Economics and Finance 475, Stockholm School of Economics.
  4. Matros, Alexander, 2012. "Altruistic versus egoistic behavior in a Public Good game," Journal of Economic Dynamics and Control, Elsevier, vol. 36(4), pages 642-656.
  5. Constanza Fosco & Friederike Mengel, 2009. "Cooperation through Imitation and Exclusion in Networks," Working Papers 2009.37, Fondazione Eni Enrico Mattei.
  6. Burkhard Schipper, 2011. "Strategic Control of Myopic Best Reply in Repeated Games," Working Papers 115, University of California, Davis, Department of Economics.

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