When a strategic situation arises repeatedly, the possibility arises that equilibrium predictions can be justified by a dynamic adjustment process. We examine myopic adjustment dynamics, a class that includes replicator dynamics from evolutionary game theory, simple models of imitation, models of experimentation and adjustment, and some simple learning dynamics. We present a series of theorems showing conditions under which behavior that is asymptotically stable under some such dynamic is strategically stable (Kohlberg and Mertens [1986]). This behavior is thus as if the agents in the economy satisfied the extremely stringent assumptions that game theory traditionally makes about rationality and beliefs.
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number
1001.
Length: Date of creation: Jun 1991 Date of revision: Handle: RePEc:nwu:cmsems:1001
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Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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Akihiko Matsui & Kiminori Matsuyama, 1991.
"An Approach to Equilibrium Selection,"
Discussion Papers
1065, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]
Other versions:
Akihiko Matsui & Kiminori Matsuyama, 1990.
"An Approach to Equilibrium Selection,"
Discussion Papers
970, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
[Downloadable!]