Evolutionary Drift and Equilibrium Selection
This paper develops an approach to equilibrium selection in game theory based on studying the learning process through which equilibrium is achieved. The differential equations derived from models of interactive learning typically have stationary states that are not isolated. Instead, Nash equilibria that specifies different out-of-equilibrium behavior appear in connected components of stationary states. The stability properties of these components can depend critically on the perturbations to which the system is subjected. The authors argue that it is then important to incorporate such drift into the model. A sufficient condition is provided for drift to create stationary states, with strong stability properties, near a component of equilibria. Applications to questions of forward and backward induction are developed. Copyright 1999 by The Review of Economic Studies Limited.
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Volume (Year): 66 (1999)
Issue (Month): 2 (April)
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