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Global analysis of an expectations augmented evolutionary dynamics

Author

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  • Antoci, Angelo
  • Gay, Antonio
  • Landi, Massimiliano
  • Sacco, Pier Luigi

Abstract

We consider a deterministic evolutionary model where players form expectations about future play. Players are not fully rational and have expectations that change over time in response to current payoffs and feedback from the past. We provide a complete characterization of the qualitative dynamics so induced for a two strategy population game, and relate our findings to standard evolutionary dynamics and equilibrium selection when agents have rational forward looking expectations.

Suggested Citation

  • Antoci, Angelo & Gay, Antonio & Landi, Massimiliano & Sacco, Pier Luigi, 2008. "Global analysis of an expectations augmented evolutionary dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3877-3894, December.
    • Handle: RePEc:eee:dyncon:v:32:y:2008:i:12:p:3877-3894
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    References listed on IDEAS

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    1. Bischi, Gian Italo & Kopel, Michael, 2001. "Equilibrium selection in a nonlinear duopoly game with adaptive expectations," Journal of Economic Behavior & Organization, Elsevier, vol. 46(1), pages 73-100, September.
    2. Diamond, Peter & Fudenberg, Drew, 1989. "Rational Expectations Business Cycles in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 606-619, June.
    3. John Conlisk, 2001. "Costly Predation and the Distribution of Competence," American Economic Review, American Economic Association, vol. 91(3), pages 475-484, June.
    4. Kiminori Matsuyama, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 617-650.
    5. Hommes, Cars H., 1998. "On the consistency of backward-looking expectations: The case of the cobweb," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 333-362, January.
    6. Matsui Akihiko & Matsuyama Kiminori, 1995. "An Approach to Equilibrium Selection," Journal of Economic Theory, Elsevier, vol. 65(2), pages 415-434, April.
    7. Burdzy, Krzysztof & Frankel, David M & Pauzner, Ady, 2001. "Fast Equilibrium Selection by Rational Players Living in a Changing World," Econometrica, Econometric Society, vol. 69(1), pages 163-189, January.
    8. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-666, May.
    9. Hommes, Cars & Sorger, Gerhard, 1998. "Consistent Expectations Equilibria," Macroeconomic Dynamics, Cambridge University Press, vol. 2(03), pages 287-321, September.
    10. Lagunoff, Roger, 2000. "On the Evolution of Pareto-Optimal Behavior in Repeated Coordination Problems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 273-293, May.
    11. Angelo Antoci & Pier Sacco, 1995. "A public contracting evolutionary game with corruption," Journal of Economics, Springer, vol. 61(2), pages 89-122, June.
    12. Matsui, Akihiko & Oyama, Daisuke, 2006. "Rationalizable foresight dynamics," Games and Economic Behavior, Elsevier, vol. 56(2), pages 299-322, August.
    13. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 651-667.
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    Cited by:

    1. Josephson, Jens, 2009. "Stochastic adaptation in finite games played by heterogeneous populations," Journal of Economic Dynamics and Control, Elsevier, vol. 33(8), pages 1543-1554, August.
    2. Pedro, de Mendonça, 2009. "Self-Enforcing Climate Change Treaties: A Generalized Differential Game Approach with Applications," MPRA Paper 17889, University Library of Munich, Germany.
    3. Oyama, Daisuke, 2009. "Agglomeration under forward-looking expectations: Potentials and global stability," Regional Science and Urban Economics, Elsevier, vol. 39(6), pages 696-713, November.

    More about this item

    Keywords

    Evolutionary games Dynamic systems Bounded rationality;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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