Muddling Through: Noisy Equilibrium Selection

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Muddling Through: Noisy Equilibrium Selection

Author Info

Ken Binmore (University College London)
Larry Samuelson (University of Wisconsin)

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Larry Samuelson

Abstract

We examine an evolutionary model in which the primary source of "noise" that moves the model between equilibria is not random, arbitrarily improbable mutations but mistakes in learning. We find conditions under which the payoff-dominant equilibrium in a 2x2 game is selected by the model as well as conditions under which the risk-dominant equlibrium is selected. The relevant risk-dominance considerations, however, arise not in the original game but in a "fitness game" derived from the process by which payoffs in the original game are translated into evolutionary fitnesses. We also find that waiting times until the limiting distribution is reached can be shorter than in a mutation-driven model. To explore the robustness of the results to the specification of the model, we present a number of comparative static results as well as a "two-tiered" evolutionary model in which the rules by which agents learn to play the game are themselves subject to evolutionary pressure.

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Paper provided by EconWPA in its series Game Theory and Information with number 9410002.

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Date of creation: 26 Oct 1994
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Handle: RePEc:wpa:wuwpga:9410002

Note: Three tex files; use kbmacros and larrybib in muddle.
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Paper
- Ken Binmore & Larry Samuelson, 1994. "Muddling Through:Noisy Equilibrium Selection," Game Theory and Information 9403005, EconWPA, revised 29 Mar 1994. [Downloadable!]
- Binmore, Ken & Larry Samuelson, 1994. "Muddling Through: Noisy Equilibrium Selection," Discussion Paper Serie B 275, University of Bonn, Germany.

Find related papers by JEL classification:
C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
D8 - Microeconomics - - Information, Knowledge, and Uncertainty

References listed on IDEAS
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Allison, G. & Fudenberg, D., 1992. "Rules of Thumb for Social Learning," Working papers 92-12, Massachusetts Institute of Technology (MIT), Department of Economics.
Other versions:
- Ellison, Glenn & Fudenberg, Drew, 1992. "Rules of Thumb for Social Learning," IDEI Working Papers 17, Institut d'Économie Industrielle (IDEI), Toulouse.
- Ellison, Glenn & Fudenberg, Drew, 1993. "Rules of Thumb for Social Learning," Journal of Political Economy, University of Chicago Press, vol. 101(4), pages 612-43, August. [Downloadable!] (restricted)
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Other versions:
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- Mark Bagnoli & Ted Bergstrom, 2005. "Log-concave probability and its applications," Economic Theory, Springer, vol. 26(2), pages 445-469, 08. [Downloadable!] (restricted)
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Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September. [Downloadable!] (restricted)
Other versions:
- Carlsson, H. & Van Damme, E., 1990. "Global Games And Equilibrium Selection," Papers 9052, Tilburg - Center for Economic Research.
Itzhak Gilboa & David Schmeidler, 1993. "Case-Based Optimization," Discussion Papers 1039, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
Other versions:
- Gilboa, Itzhak & Schmeidler, David, 1996. "Case-Based Optimization," Games and Economic Behavior, Elsevier, vol. 15(1), pages 1-26, July. [Downloadable!] (restricted)
repec:att:wimass:199323 is not listed on IDEAS
repec:att:wimass:199324 is not listed on IDEAS
Noeldecke,Georg & Samuelson,Larry, . "An evolutionary analysis of backward and forward induction," Discussion Paper Serie B 228, University of Bonn, Germany.
Other versions:
- Noldeke Georg & Samuelson Larry, 1993. "An Evolutionary Analysis of Backward and Forward Induction," Games and Economic Behavior, Elsevier, vol. 5(3), pages 425-454, July. [Downloadable!] (restricted)
Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. [Downloadable!] (restricted)

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