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Loss of Commitment? An Evolutionary Analysis of Bagwell’s Example

  • Jörg Oechssler
  • Karl H Schlag

In a recent paper Bagwell (1995) pointed out that only the Cournot outcome, but not the Stackelberg outcome, can be supported by a pure Nash equilibrium when actions of the Stackelberg leader are observed with the slightest error. The Stackelberg outcome, however, remains close to the outcome of a mixed equilibrium. We compare the predictions in various classes of evolutionary and learning processes in this game. Only the continuous best response dynamic uniquely selects the Stackelberg outcome under noise. All other dynamics analyzed allow for the Cournot equilibrium to be selected. In typical cases Cournot is the unique long run outcome even for vanishing noise in the signal.

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Paper provided by David K. Levine in its series Levine's Working Paper Archive with number 598.

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Date of creation: 14 May 1997
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Handle: RePEc:cla:levarc:598
Contact details of provider: Web page: http://www.dklevine.com/

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  1. Noeldecke,Georg & Samuelson,Larry, . "An evolutionary analysis of backward and forward induction," Discussion Paper Serie B 228, University of Bonn, Germany.
  2. van Damme, Eric & Hurkens, Sjaak, 1997. "Games with Imperfectly Observable Commitment," Games and Economic Behavior, Elsevier, vol. 21(1-2), pages 282-308, October.
  3. Cressman, R. & Schlag, K. H., 1998. "The Dynamic (In)Stability of Backwards Induction," Journal of Economic Theory, Elsevier, vol. 83(2), pages 260-285, December.
  4. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384, June.
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  7. Georg Kirchsteiger & Werner Güth & Klaus Ritzberger, 1998. "Imperfectly observable commitments in n-player games," ULB Institutional Repository 2013/5907, ULB -- Universite Libre de Bruxelles.
  8. P. Young, 1999. "The Evolution of Conventions," Levine's Working Paper Archive 485, David K. Levine.
  9. L. Samuelson & J. Zhang, 2010. "Evolutionary Stability in Asymmetric Games," Levine's Working Paper Archive 453, David K. Levine.
  10. Samuelson, Larry & Zhang, Jianbo, 1992. "Evolutionary stability in asymmetric games," Journal of Economic Theory, Elsevier, vol. 57(2), pages 363-391, August.
  11. Dan Friedman, 2010. "Evolutionary Games in Economics," Levine's Working Paper Archive 392, David K. Levine.
  12. Bagwell, Kyle, 1995. "Commitment and observability in games," Games and Economic Behavior, Elsevier, vol. 8(2), pages 271-280.
  13. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  14. Schlag, Karl H., 1994. "Why Imitate, and if so, How? Exploring a Model of Social Evolution," Discussion Paper Serie B 296, University of Bonn, Germany.
  15. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-66, May.
  16. B. Adolph, 1996. "Commitment, Trembling Hand Imperfection and Observability in Games," SFB 373 Discussion Papers 1996,84, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  17. Karl H. Schlag, . "Why Imitate, and if so, How? A Bounded Rational Approach to Multi- Armed Bandits," ELSE working papers 028, ESRC Centre on Economics Learning and Social Evolution.
  18. Gale, John & Binmore, Kenneth G. & Samuelson, Larry, 1995. "Learning to be imperfect: The ultimatum game," Games and Economic Behavior, Elsevier, vol. 8(1), pages 56-90.
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