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Endogenous selection of aspiring and rational rules in coordination games

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  • Dziubinski, Marcin
  • Roy, Jaideep

Abstract

The paper studies an evolutionary model where players from a given population are randomly matched in pairs each period to play a co- ordination game. At each instant, a player can choose to adopt one of the two possible behavior rules, called the rational rule and the as- piring rule, and then take actions prescribed by the chosen rule. The choice between the two rules depends upon their relative performance in the immediate past. We show that there are two stable long run outcomes where either the rational rule becomes extinct and all play- ers in the population achieve full eciency, or that both the behavior rules co-exist and there is only a partial use of ecient strategies in the population. These ndings support the use of the aspiration driven behavior in several existing studies and also help us take a comparative evolutionary look at the two rules in retrospect.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 5941.

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Date of creation: 25 Nov 2007
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Handle: RePEc:pra:mprapa:5941

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Keywords: Co-evolution; Aspirations; Best-response; Random matching; Coordination games;

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  1. Karandikar, Rajeeva & Mookherjee, Dilip & Ray, Debraj & Vega-Redondo, Fernando, 1998. "Evolving Aspirations and Cooperation," Journal of Economic Theory, Elsevier, Elsevier, vol. 80(2), pages 292-331, June.
  2. Corchon, Luis C. & Mas-Colell, Andreu, 1996. "On the stability of best reply and gradient systems with applications to imperfectly competitive models," Economics Letters, Elsevier, Elsevier, vol. 51(1), pages 59-65, April.
  3. Bendor, J. & Mookherjee, D. & Ray, D., 1994. "Aspirations, Adaptive Learning and Cooperation in Reapeted Games," Papers, Boston University - Department of Economics 27, Boston University - Department of Economics.
  4. Eshel, I. & Samuelson, L. & Shaked, A., 1996. "Altruists, Egoists and Hooligans in a Local Interaction Model," Working papers, Wisconsin Madison - Social Systems 9612r, Wisconsin Madison - Social Systems.
  5. Ken Binmore & Larry Samuelson, 1994. "Muddling Through:Noisy Equilibrium Selection," Game Theory and Information, EconWPA 9403005, EconWPA, revised 29 Mar 1994.
  6. Palomino, F. & Vega, F., 1996. "Convergence of Aspirations and (Partial) Cooperation in the Prisoners's Dilemma," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 345.96, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  7. Binmore, Ken & Samuelson, Larry, 1997. "Muddling Through: Noisy Equilibrium Selection," Journal of Economic Theory, Elsevier, Elsevier, vol. 74(2), pages 235-265, June.
  8. Bendor Jonathan & Mookherjee Dilip & Ray Debraj, 2001. "Reinforcement Learning in Repeated Interaction Games," The B.E. Journal of Theoretical Economics, De Gruyter, De Gruyter, vol. 1(1), pages 1-44, March.
  9. Cross, John G, 1973. "A Stochastic Learning Model of Economic Behavior," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 87(2), pages 239-66, May.
  10. Herbert Simon & Lindsay McSweeney, 2010. "A Behavioral Model of Rational Choice," CPI Journal, Competition Policy International, Competition Policy International, vol. 6.
  11. Dixon, Huw David, 2000. "Keeping up with the Joneses: competition and the evolution of collusion," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 43(2), pages 223-238, October.
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