The Evolution of Coordination under Inertia
AbstractThis paper models the phenomenon of inertia driven by individual strategy switching costs in a stochastic evolutionary context. Kandori, Mailath, and Rob`s (1993) model of a finite population of agents repeatedly playing a 2x2 symmetric coordination game is extended to allow for such inertia. Taking noise to the limit, a number of new short- to medium-run equilibria emerge, centred around the mixed-strategy equilibrium. Thus, unusually, an evolutionary model is seen to provide some justification for the controversial concept of mixed-strategy equilibrium. However, Kandori, Mailath, and Rob`s long-run selection of the risk-dominant equilibrium continues to hold, both under fixed-rate mutations and under state-dependent mutations driven by stochastic switching costs. The key to this is the satisfaction of Blume`s (1999) skew-symmetry of the noise process, which is shown to be crucial even under simultaneous strategy revisions. In fact, the presence of the new short-run equilibria can under certain conditions serve to reduce the expected waiting time before the risk-dominant equilibrium is reached - an instance of Ellison`s (2000) idea that evolution is more rapid when it can proceed via a series of small steps between extremes. This suggests inertia to be a surprisingly efficient phenomenon, and also serves to moderate the force of the Ellison (1993) critique of excessively long transition times in models with vanishing noise.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 2003-W06.
Date of creation: 01 Jan 2003
Date of revision:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lee, In Ho & Szeidl, Adam & Valentinyi, Akos, 2000.
"Contagion and state dependent mutations,"
Discussion Paper Series In Economics And Econometrics
0027, Economics Division, School of Social Sciences, University of Southampton.
- Lipman, Barton L. & Wang, Ruqu, 2000.
"Switching Costs in Frequently Repeated Games,"
Journal of Economic Theory,
Elsevier, vol. 93(2), pages 149-190, August.
- Thomas Norman, 2003. "The Evolution of Conflict under Inertia," Economics Papers 2003-W07, Economics Group, Nuffield College, University of Oxford.
- Myatt, David P. & Wallace, Chris C., 2004.
"Adaptive play by idiosyncratic agents,"
Games and Economic Behavior,
Elsevier, vol. 48(1), pages 124-138, July.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Caroline Wise).
If references are entirely missing, you can add them using this form.