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Evolutionary Drift and Equilibrium Selection

Author

Listed:
  • Binmore, Ken

    (Department of Economics, University College London)

  • Samuelson, Larry

    (Department of Economics, University of Wisconsin)

Abstract

This paper develops an approach to equilibrium selection in game theory based on studying the equilibriating process through which equilibrium is achieved. The differential equations derived from models of interactive learning typically have stationary states that are not isolated. Instead, Nash equilibria that specify the same behavior on the equilibrium path, but different out-of-equilibrium behavior, appear in connected components of stationary states. The stability properties of these components often depend critically on the perturbations to which the system is subjected. We argue that it is then important to incorporate such drift into the model. A sufficient condition is provided for drift to create stationary states with strong stability properties near a component of equilibria. This result is used to derive comparative static predictions concerning common questions raised in the literature on refinements of Nash equlibrium.

Suggested Citation

  • Binmore, Ken & Samuelson, Larry, 1996. "Evolutionary Drift and Equilibrium Selection," Economics Series 26, Institute for Advanced Studies.
  • Handle: RePEc:ihs:ihsesp:26
    as

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    File URL: http://www.ihs.ac.at/publications/eco/es-26.pdf
    File Function: First version, 1996
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    References listed on IDEAS

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    Cited by:

    1. Cabrales, Antonio, 1999. "Adaptive Dynamics and the Implementation Problem with Complete Information," Journal of Economic Theory, Elsevier, vol. 86(2), pages 159-184, June.
    2. Boris Salazar, 2001. "¿Qué tan racional es el principio de racionalidad de Popper?," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 3(5), pages 52-77, July-Dece.
    3. Bosch-Domenech, Antoni & Saez-Marti, Maria, 2001. "Cycles of Aggregate Behavior in Theory and Experiment," Games and Economic Behavior, Elsevier, vol. 36(2), pages 105-137, August.

    More about this item

    Keywords

    Evolutionary Games; Cheap Talk; Stability Drift;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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