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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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    References listed on IDEAS

    as
    1. McFadzean, David & Tesfatsion, Leigh, 1999. "A C++ Platform for the Evolution of Trade Networks," Computational Economics, Springer;Society for Computational Economics, vol. 14(1-2), pages 109-134, October.
    2. William A. Brock & Steven N. Durlauf, 2001. "Discrete Choice with Social Interactions," Review of Economic Studies, Oxford University Press, vol. 68(2), pages 235-260.
    3. Hirshlifer, David & Rassmusen, Eric, 1989. "Cooperation in a repeated prisoners' dilemma with ostracism," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 87-106, August.
    4. Dan Ashlock & Mark D. Smucker & E. Ann Stanley & Leigh Tesfatsion, 1995. "Preferential Partner Selection in an Evolutionary Study of Prisoner's Dilemma," Game Theory and Information 9501002, University Library of Munich, Germany, revised 20 Jan 1995.
    5. Stanley, E.A. & Ashlock, Daniel & Tesfatsion, Leigh, 1994. "Iterated Prisoner's Dilemma with Choice and Refusal of Partners," Staff General Research Papers Archive 11180, Iowa State University, Department of Economics.
    6. Alan P. Kirman, 1994. "Economies with Interacting Agents," Working Papers 94-05-030, Santa Fe Institute.
    7. Yannis M. Ioannides, 1996. "Evolution of Trading Structures," Working Papers 96-04-020, Santa Fe Institute.
    8. Roth, Alvin E. & Sotomayor, Marilda, 1992. "Two-sided matching," Handbook of Game Theory with Economic Applications,in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541 Elsevier.
    9. George Mailath & Larry Samuelson & Avner Shaked, 1994. "Evolution and Endogenous Interactions," Game Theory and Information 9410003, University Library of Munich, Germany.
    10. Esther Hauk, "undated". "Leaving the Prison: A Discussion of the Iterated Prisoner's Dilemma under Preferential Partner Selection," Computing in Economics and Finance 1996 _067, Society for Computational Economics.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Trade network formation; evolutionary game; endogenous partner selection; iterated prisoner's dilemma; Gale-Shapley matching;

    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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