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A Model of Evolutionay Drift

  • Uriarte Ayo, José Ramón

Drift appears to be crucial to study the stability properties of Nash equilibria in a component specifying different out-of-equilibrium behaviour. We propose a new microeconomic model of drift to be added to the learning process by which agents find their way to equilibrium. A key feature of the model is the sensitivity of the noisy agent to the proportion of agents in his player population playing the same strategy as his current one. We show that, 1. Perturbed Payoff-Positive and PayoffMonotone selection dynamics are capable of stabilizing pure non strict Nash equilibria in either singleton or nonsingleton component of equilibria; 2. The model is relevant to understand the role of drift in the behaviour observed in the laboratory for the Ultimatum Game and for predicting outcomes that can be experimentally tested. Hence, the selection dynamics model perturbed with the proposed drift may be seen as well as a new learning tool to understand observed behaviour.

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File URL: http://hdl.handle.net/10810/6502
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Paper provided by Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I in its series IKERLANAK with number 2003-01.

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Date of creation: Feb 2003
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Handle: RePEc:ehu:ikerla:200301
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Order Information: Postal: Dpto. de Fundamentos del Análisis Económico I, Facultad de CC. Económicas y Empresariales, Universidad del País Vasco, Avda. Lehendakari Aguirre 83, 48015 Bilbao, Spain
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  1. Binmore, K. & Samuelson, L., 1997. "Evolutionary Drift and Equilibrium Selection," Working papers 9729r, Wisconsin Madison - Social Systems.
  2. H. Peyton Young, 1996. "The Economics of Convention," Journal of Economic Perspectives, American Economic Association, vol. 10(2), pages 105-122, Spring.
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