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Imitation and Experimentation in a Changing Environment

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  • Francesco Squintani
  • Juuso Valimaki

Abstract

This paper analyzes the equilibrium play in a random matching model with a changing environment. Under myopic decision making, players adopt imitation strategies similar to those observed in evolutionary models with sampling from past play in the population. If the players are patient, equilibrium strategies display elements of experimentation in addition to imitation. If the changes in the environment are infrequent enough, these strategies succeed in coordinating almost all of the players on the dominant action almost all of the time. The myopic rules, on the other hand, result in mis-coordination for a positive fraction of time.

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Bibliographic Info

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1275.

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Date of creation: Oct 1999
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Handle: RePEc:nwu:cmsems:1275

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  1. Hofbauer, Josef & Weibull, Jorgen W., 1996. "Evolutionary Selection against Dominated Strategies," Journal of Economic Theory, Elsevier, vol. 71(2), pages 558-573, November.
  2. RUSTICHINI, Aldo & WOLINSKY , Asher, 1993. "Learning about Variable Demand in the Long Run," CORE Discussion Papers 1993017, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Godfrey Keller & Sven Rady, 1997. "Optimal Experimentation in a Changing Environment," STICERD - Theoretical Economics Paper Series /1997/333, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  4. Karl H. Schlag, . "Why Imitate, and if so, How? A Bounded Rational Approach to Multi- Armed Bandits," ELSE working papers 028, ESRC Centre on Economics Learning and Social Evolution.
  5. Giuseppe Moscarin & Marco Ottaviani & Lones Smith, . "Social Learning in a Changing World," ELSE working papers 010, ESRC Centre on Economics Learning and Social Evolution.
  6. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-66, May.
  7. K. Schlag, 2010. "Why Imitate, and if so, How? Exploring a Model of Social Evolution," Levine's Working Paper Archive 454, David K. Levine.
  8. Boylan, Richard T., 1992. "Laws of large numbers for dynamical systems with randomly matched individuals," Journal of Economic Theory, Elsevier, vol. 57(2), pages 473-504, August.
  9. Jorgen W. Weibull, 1997. "Evolutionary Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731215, December.
  10. Smith, L. & Sorensen, P., 1996. "Pathological Outcomes of Observational Learning," Economics Papers 115, Economics Group, Nuffield College, University of Oxford.
  11. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
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