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On the dynamics of word of mouth learningwith and without anticipations

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  • H. Dawid

Abstract

We analyze the learning behavior of two populations engaged in playing a “battle of thesexes” game. The boundedly rational players change their strategy with some positive probabilityif they learn, via direct communication with other players, about a strategy whichcurrently has a higher payoff than their own. In games with no risk‐dominant equilibrium,this learning rule leads to convergence towards one of the pure strategies' coordinationequilibria if the initial population distributions are asymmetric. For symmetric initialpopulation distributions, depending on the players' propensity to adopt new strategies, convergencetowards the mixed strategies' equilibrium or periodic and complex behavior mightoccur. The introduction of anticipations leads to the emergence of stable fixed points of thelearning process, which are no Nash equilibria, via a fold and a transcritical bifurcation. Ifone equilibrium is risk dominant, this equilibrium has a larger basin of attraction than theother coordination state for both the dynamics with and without anticipations. However, theintroduction of anticipations increases the basin of attraction of the risk‐dominated equilibrium. Copyright Kluwer Academic Publishers 1999

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  • H. Dawid, 1999. "On the dynamics of word of mouth learningwith and without anticipations," Annals of Operations Research, Springer, vol. 89(0), pages 273-295, January.
    • Handle: RePEc:spr:annopr:v:89:y:1999:i:0:p:273-295:10.1023/a:1018983808923
    DOI: 10.1023/A:1018983808923
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    Cited by:

    1. Brianzoni, Serena & Coppier, Raffaella & Michetti, Elisabetta, 2019. "Evolutionary effects of non-compliant behavior in public procurement," Structural Change and Economic Dynamics, Elsevier, vol. 51(C), pages 106-118.
    2. Bischi, G.-I. & Dawid, H. & Kopel, M., 2003. "Gaining the competitive edge using internal and external spillovers: a dynamic analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 27(11), pages 2171-2193.
    3. Fabio Lamantia & Mario Pezzino, 2018. "The dynamic effects of fiscal reforms and tax competition on tax compliance and migration," Review of International Economics, Wiley Blackwell, vol. 26(3), pages 672-690, August.
    4. Raffaella Coppier & Francesca Grassetti & Elisabetta Michetti, 2021. "Non-compliant behaviour in public procurement: an evolutionary model with endogenous monitoring," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(1), pages 459-483, June.
    5. Fabio Lamantia & Mario Pezzino, 2021. "Social norms and evolutionary tax compliance," Manchester School, University of Manchester, vol. 89(4), pages 385-405, July.
    6. Fabio Lamantia & Mario Pezzino & Fabio Tramontana, 2017. "Tax Evasion, Intrinsic Motivation, and the Evolutionary Effects of Tax Reforms," Economics Discussion Paper Series 1707, Economics, The University of Manchester.

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