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A Trade Network Game with Endogenous Partner Selection

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  • Tesfatsion, Leigh

Abstract

This paper develops an evolutionary trade network game (TNG) that combines evolutionary game play with endogenous partner selection. Successive generations of resource-constrained buyers and sellers choose and refuse trade partners on the basis of continually updated expected payoffs. Trade partner selection takes place in accordance with a modified Gale-Shapley matching mechanism, and trades are implemented using trade strategies evolved via a standardly specified genetic algorithm. The trade partnerships resulting from the matching mechanism are shown to be core stable and Pareto optimal in each successive trade cycle. Nevertheless, computer experiments suggest that these static optimality properties may be inadequate measures of optimality from an evolutionary perspective. Related work can be accessed at: http://www2.econ.iastate.edu/tesfatsi/tnghome.htm

Suggested Citation

  • Tesfatsion, Leigh, 1997. "A Trade Network Game with Endogenous Partner Selection," Staff General Research Papers Archive 1680, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:1680
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    File URL: http://www2.econ.iastate.edu/tesfatsi/tngroot.pdf
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    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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