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Equilibrium selection in the two-population KMR model

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  • Burkhard Hehenkamp

Abstract

This paper shows that, contrary to common conception, robust equilibrium selection is possible in the two-population model of evolution by Kandori, Mailath and Rob (1993). Investigating the class of individualistic adjustment dynamics, we establish that, for generic 2x2 co-ordination games, the evolutionary process always selects the mutation-dominant equilibrium. The concepts of mutation dominance and risk dominance yield different equilibrium predictions, since the concept of mutation dominance additionally captures the systemic risk arising from random matching.

Suggested Citation

  • Burkhard Hehenkamp, 2001. "Equilibrium selection in the two-population KMR model," Discussion Papers in Economics 01_01, University of Dortmund, Department of Economics.
    • Handle: RePEc:mik:wpaper:01_01
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    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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