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An Approach to Equilibrium Selection

  • Matsui Akihiko
  • Matsuyama Kiminori

We consider equilibrium selection in 2x2 bimatrix games with two strict Nash equilibria in a random matching framework. The players seek to maximize the discounted payoffs, but are restricted to make a short run commitment. Modeling the friction this way yields equilibrium dynamics of the behavior patters in the society. We define and characterize an absorbing and globally attractive state in this dynamics. It is shown that, as friction becomes arbitrarily small, a strict Nash equilibrium outcome becomes unique absorbing and globally attractive if and only if it satisfies the Harsanyi/Selton notion of risk-dominance criterion.

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Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 65 (1995)
Issue (Month): 2 (April)
Pages: 415-434

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Handle: RePEc:eee:jetheo:v:65:y:1995:i:2:p:415-434
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  21. Kiminori Matsuyama, 1991. "Custom Versus Fashion: Hysteresis and Limit Cycles in a Random Matching Game," Discussion Papers 940, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  22. Matsui, Akihiko, 1991. "Cheap-talk and cooperation in a society," Journal of Economic Theory, Elsevier, vol. 54(2), pages 245-258, August.
  23. Murphy, Kevin M. & Shleifer, Andrei & Vishny, Robert W., 1989. "Industrialization and the Big Push," Scholarly Articles 3606235, Harvard University Department of Economics.
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  25. Kandori, M. & Mailath, G.J., 1991. "Learning, Mutation, And Long Run Equilibria In Games," Papers 71, Princeton, Woodrow Wilson School - John M. Olin Program.
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  27. Kiminori Matsuyama, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 617-650.
  28. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-66, May.
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