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The evolution of conventions under incomplete information

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Author Info

  • Hans Jorgen Jacobsen
  • Mogens Jensen
  • Birgitte Sloth

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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Bibliographic 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/

Related research

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

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Cited by:
  1. Roberto Serrano & Rene Saran, 2007. "The Evolution Of Bidding Behavior In Private-Values Auctions And Double Auctions," Working Papers, CEMFI wp2007_0712, CEMFI.
  2. Rene Saran & Roberto Serrano, 2010. "Ex-post regret learning in games with fixed and random matching: The case of private values," Working Papers, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales 2010-11, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  3. Saran Rene & Serrano Roberto, 2010. "Ex-Post Regret Learning in Games with Fixed and Random Matching: The Case of Private Values," Research Memorandum 032, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).

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