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Expectations, drift and volatility in evolutionary games

Author

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  • Fernando Vega Redondo

    (Instituto Valenciano de Investigaciones Económicas)

Abstract

This paper introduces expectations into the framework of evolutionary games. On the one hand, (myopic) players are assumed to behave optimally according to the expectations they hold at each point of the process. On the other hand, expectations themselves are continuously updated according to the players' latest experience. The possibility of random drift on expectations (i.e., arbitrary variation on them not opposed by selection forces) produces sharp volatility across equilibria. Specifically, all Nash equilibria (but only these) have positive weight in the limit stationary distribution, independently of risk -or payoff-dominance considerations.

Suggested Citation

  • Fernando Vega Redondo, 1994. "Expectations, drift and volatility in evolutionary games," Working Papers. Serie AD 1994-02, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    • Handle: RePEc:ivi:wpasad:1994-02
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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-1994-02.pdf
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    Cited by:

    1. Dawid, Herbert, 1997. "Learning of equilibria by a population with minimal information," Journal of Economic Behavior & Organization, Elsevier, vol. 32(1), pages 1-18, January.
    2. Weibull, Jörgen W., 1997. "What have we learned from Evolutionary Game Theory so far?," Working Paper Series 487, Research Institute of Industrial Economics, revised 26 Oct 1998.
    3. Susan Lee, 1999. "Assortative Interactions and Endogenous Stratification," Working Papers 99-08-056, Santa Fe Institute.
    4. Dieckmann, Tone, 1999. "The evolution of conventions with mobile players," Journal of Economic Behavior & Organization, Elsevier, vol. 38(1), pages 93-111, January.
    5. Dawid, Herbert, 1999. "On the convergence of genetic learning in a double auction market," Journal of Economic Dynamics and Control, Elsevier, vol. 23(9-10), pages 1545-1567, September.
    6. Dawid, Herbert, 2000. "On the emergence of exchange and mediation in a production economy," Journal of Economic Behavior & Organization, Elsevier, vol. 41(1), pages 27-53, January.
    7. Tone Dieckmann, 1997. "The Evolution of conventions with Mobile Players," Economics Department Working Paper Series n720897, Department of Economics, National University of Ireland - Maynooth.
    8. Tone Dieckmann, 1998. "Stochastic Learning and the Evolution of Conventions," Constitutional Political Economy, Springer, vol. 9(3), pages 187-212, September.

    More about this item

    Keywords

    Drift; volatility; evolution;
    All these keywords.

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