The Evolution of Coordination under Inertia
This paper models the phenomenon of inertia driven by individual strategy switching costs in a stochastic evolutionary context. Kandori, Mailath, and Rob`s (1993) model of a finite population of agents repeatedly playing a 2x2 symmetric coordination game is extended to allow for such inertia. Taking noise to the limit, a number of new short- to medium-run equilibria emerge, centred around the mixed-strategy equilibrium. Thus, unusually, an evolutionary model is seen to provide some justification for the controversial concept of mixed-strategy equilibrium. However, Kandori, Mailath, and Rob`s long-run selection of the risk-dominant equilibrium continues to hold, both under fixed-rate mutations and under state-dependent mutations driven by stochastic switching costs. The key to this is the satisfaction of Blume`s (1999) skew-symmetry of the noise process, which is shown to be crucial even under simultaneous strategy revisions. In fact, the presence of the new short-run equilibria can under certain conditions serve to reduce the expected waiting time before the risk-dominant equilibrium is reached - an instance of Ellison`s (2000) idea that evolution is more rapid when it can proceed via a series of small steps between extremes. This suggests inertia to be a surprisingly efficient phenomenon, and also serves to moderate the force of the Ellison (1993) critique of excessively long transition times in models with vanishing noise.
|Date of creation:||01 Jan 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.economics.ox.ac.uk/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barton L. Lipman & Ruqu Wang, 1997.
"Switching Costs in Frequently Repeated Games,"
1190, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Myatt, David P. & Wallace, Chris C., 2004.
"Adaptive play by idiosyncratic agents,"
Games and Economic Behavior,
Elsevier, vol. 48(1), pages 124-138, July.
- Thomas Norman, 2003.
"The Evolution of Conflict under Inertia,"
Economics Series Working Papers
2003-W07, University of Oxford, Department of Economics.
- Klemperer, Paul, 1987. "Markets with Consumer Switching Costs," The Quarterly Journal of Economics, MIT Press, vol. 102(2), pages 375-94, May.
- Glen Ellison, 2010.
"Learning from Personal Experience: One Rational Guy and the Justification of Myopia,"
Levine's Working Paper Archive
413, David K. Levine.
- Ellison, Glenn, 1997. "Learning from Personal Experience: One Rational Guy and the Justification of Myopia," Games and Economic Behavior, Elsevier, vol. 19(2), pages 180-210, May.
- Lee In Ho & Szeidl Adam & Valentinyi Akos, 2003.
"Contagion and State Dependent Mutations,"
The B.E. Journal of Theoretical Economics,
De Gruyter, vol. 3(1), pages 1-29, February.
- Adam Szeidl & In Ho Lee & Akos Valentinyi, 2001. "Contagion and State Dependent Mutations," IEHAS Discussion Papers 0104, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
- Lee, In Ho & Szeidl, Adam & Valentinyi, Akos, 2000. "Contagion and state dependent mutations," Discussion Paper Series In Economics And Econometrics 0027, Economics Division, School of Social Sciences, University of Southampton.
- van Damme, E.E.C. & Weibull, J., 1998.
"Evolution with Mutations Driven by Control Costs,"
1998-94, Tilburg University, Center for Economic Research.
- Eric Van Damme & Jorgen W Weibull, 1999. "Evolution with Mutations Driven by Control Costs," Levine's Working Paper Archive 2113, David K. Levine.
- Weibull, Jörgen W. & van Damme, Eric, 1998. "Evolution with Mutations Driven by Control Costs," Working Paper Series 501, Research Institute of Industrial Economics.
When requesting a correction, please mention this item's handle: RePEc:oxf:wpaper:2003-w06. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Monica Birds)
If references are entirely missing, you can add them using this form.