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The Evolution of Conventions under Incomplete Information

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Author Info
Hans Jorgen Jacobsen
Mogens Jensen
Birgitte Sloth

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Abstract

We formulate an evolutionary learning process in the spirit of Young (1993a) for games of incomplete information. The process involves trembles. For many games, if the amount of trembling is small, play will be in accordance with the games' (semi- strict) Bayesian equilibria most of the time. This supports the notion of Bayesian equilibrium. Further, often play will most of the time be in accordance with exactly one Bayesian equilibrium. This gives a selection among the Bayesian equilibria. For two specific games of economic interest we characterize this selection. The first is an extension to incomplete information of the prototype strategic conflict known as Chicken. The second is an incomplete information bilateral monopoly, which is also an extension to incomplete information of Nash's demand game, or a simple version of the so-called sealed bid double auction. For both games selection by evolutionary learning is in favor of Bayesian equilibria where some types of players fail to coordinate, such that the outcome is inefficient.

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Publisher Info
Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 475.

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Date of creation: Jun 1997
Date of revision: Feb 2000
Handle: RePEc:upf:upfgen:475

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Web page: http://www.econ.upf.edu/

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Related research
Keywords: Games of incomplete information; Bayesian equilibrium; evolution; learning; conventions;

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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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References listed on IDEAS
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.:
  1. 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.
  2. Canning, D., 1992. "Learning Language Conventions in Common Interest Signaling Games," Discussion Papers 1992_22, Columbia University, Department of Economics.
  3. Jacobsen, Hans Jorgen & Jensen, Mogens & Sloth, Birgitte, 2001. "Evolutionary Learning in Signalling Games," Games and Economic Behavior, Elsevier, vol. 34(1), pages 34-63, January. [Downloadable!] (restricted)
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  4. Canning, David, 1992. "Average behavior in learning models," Journal of Economic Theory, Elsevier, vol. 57(2), pages 442-472, August. [Downloadable!] (restricted)
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  5. repec:att:wimass:199518r is not listed on IDEAS
  6. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. [Downloadable!] (restricted)
  7. repec:fth:coluec:607 is not listed on IDEAS
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(explanations, 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.)

  1. Hans Jørgen Jacobsen & Mogens Jensen & Birgitte Sloth, 1998. "Evolutionary Learning in Signalling Games," CIE Discussion Papers 1999-14, University of Copenhagen. Department of Economics. Centre for Industrial Economics, revised Sep 1999. [Downloadable!]
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  2. Rene Saran & Roberto Serrano, 2007. "The Evolution of Bidding Behavior in Private-Values Auction and Double Auctions," Working Papers 2007-01, Brown University, Department of Economics. [Downloadable!]
    Other versions:
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