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Rapid Evolution under Inertia

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  • Thomas Norman

Abstract

This paper demonstrates that inertia driven by switching costs leads to more rapid evolution in a class of games that includes m x m pure coordination games. Under the best-response dynamic and a fixed rate of mutation, the expected waiting time to reach long-run equilibrium is of lower order in the presence of switching costs, due to the creation of new absorbing inertia states that allow Ellison`s (Review of Economic Studies 67, 2000, 17-45) step-by-step evolution to occur.

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Bibliographic Info

Paper provided by University of Oxford, Department of Economics in its series Economics Series Working Papers with number 299.

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Date of creation: 01 Jan 2007
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Handle: RePEc:oxf:wpaper:299

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Keywords: Evolution; Mutations; Long-run Equilibrium; Waiting Times; Inertia; Switching Costs;

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References

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  1. van Damme, Eric & Weibull, Jorgen W., 2002. "Evolution in Games with Endogenous Mistake Probabilities," Journal of Economic Theory, Elsevier, vol. 106(2), pages 296-315, October.
  2. Bergin, James & Lipman, Barton L, 1996. "Evolution with State-Dependent Mutations," Econometrica, Econometric Society, vol. 64(4), pages 943-56, July.
  3. Binmore, K. & samuelson, L., 1996. "Muddling Through : Noisy Equilibrium Section," Working papers 9410r, Wisconsin Madison - Social Systems.
  4. Sethi, Rajiv, 1998. "Strategy-Specific Barriers to Learning and Nonmonotonic Selection Dynamics," Games and Economic Behavior, Elsevier, vol. 23(2), pages 284-304, May.
  5. Myatt, David P. & Wallace, Chris C., 2004. "Adaptive play by idiosyncratic agents," Games and Economic Behavior, Elsevier, vol. 48(1), pages 124-138, July.
  6. Robson, Arthur J. & Vega-Redondo, Fernando, 1996. "Efficient Equilibrium Selection in Evolutionary Games with Random Matching," Journal of Economic Theory, Elsevier, vol. 70(1), pages 65-92, July.
  7. M. Kandori & G. Mailath & R. Rob, 1999. "Learning, Mutation and Long Run Equilibria in Games," Levine's Working Paper Archive 500, David K. Levine.
  8. Ellison, Glenn, 2000. "Basins of Attraction, Long-Run Stochastic Stability, and the Speed of Step-by-Step Evolution," Review of Economic Studies, Wiley Blackwell, vol. 67(1), pages 17-45, January.
  9. Lipman, Barton L. & Wang, Ruqu, 2000. "Switching Costs in Frequently Repeated Games," Journal of Economic Theory, Elsevier, vol. 93(2), pages 149-190, August.
  10. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, December.
  11. Tilman B�rgers & Rajiv Sarin, . "Learning Through Reinforcement and Replicator Dynamics," ELSE working papers 051, ESRC Centre on Economics Learning and Social Evolution.
  12. Blume, Lawrence E., 2003. "How noise matters," Games and Economic Behavior, Elsevier, vol. 44(2), pages 251-271, August.
  13. Glen Ellison, 2010. "Learning, Local Interaction, and Coordination," Levine's Working Paper Archive 391, David K. Levine.
  14. Brock,W.A. & Durlauf,S.N., 2000. "Discrete choice with social interactions," Working papers 7, Wisconsin Madison - Social Systems.
  15. Samuelson Larry, 1994. "Stochastic Stability in Games with Alternative Best Replies," Journal of Economic Theory, Elsevier, vol. 64(1), pages 35-65, October.
  16. Binmore, Ken & Samuelson, Larry, 1997. "Muddling Through: Noisy Equilibrium Selection," Journal of Economic Theory, Elsevier, vol. 74(2), pages 235-265, June.
  17. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  18. Klemperer, Paul, 1995. "Competition When Consumers Have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," Review of Economic Studies, Wiley Blackwell, vol. 62(4), pages 515-39, October.
  19. Ellison, Glenn, 1997. "Learning from Personal Experience: One Rational Guy and the Justification of Myopia," Games and Economic Behavior, Elsevier, vol. 19(2), pages 180-210, May.
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Cited by:
  1. Ge Jiang & Simon Weidenholzer, 2014. "Local Interactions and Switching Costs," Economics Discussion Papers 746, University of Essex, Department of Economics.
  2. Thomas Norman, 2010. "Cycles versus equilibrium in evolutionary games," Theory and Decision, Springer, vol. 69(2), pages 167-182, August.

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