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Evolutionarily Stable (Mis)specifications:Theory and Applications

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  • Kevin He

    (University of Pennsylvania)

  • Jonathan Libgober

    (University of Southern California)

Abstract

We introduce an evolutionary framework to evaluate competing (mis)specifications in strategic situations, focusing on which misspecifications can persist over correct specifications. Agents with heterogeneous specifications coexist in a society and repeatedly play a stage game against random opponents, drawing Bayesian inferences about the environment based on personal experience. One specification is evolutionarily stable against another if, when-ever sufficiently prevalent, its adherents obtain higher average payoffs than their counterparts. Agents’ equilibrium beliefs are constrained but not wholly determined by specifications. En-dogenous belief formation through the learning channel generates novel stability phenomena compared to frameworks where single beliefs are the heritable units of cultural transmission. In linear-quadratic-normal games where players receive correlated signals but possibly misperceive the information structure, the correct specification is evolutionarily unstable against a correlational error whose direction depends on social interaction structure. We also endogenize coarse thinking in games and show how its prevalence varies with game parameters.

Suggested Citation

  • Kevin He & Jonathan Libgober, 2021. "Evolutionarily Stable (Mis)specifications:Theory and Applications," PIER Working Paper Archive 21-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:21-020
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    Cited by:

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    2. Jehiel, Philippe & Mohlin, Erik, 2021. "Cycling and Categorical Learning in Decentralized Adverse Selection Economies," Working Papers 2021:11, Lund University, Department of Economics.
    3. Cuimin Ba, 2021. "Robust Misspecified Models and Paradigm Shifts," Papers 2106.12727, arXiv.org, revised Aug 2023.
    4. Drew Fudenberg & Giacomo Lanzani & Philipp Strack, 2021. "Limit Points of Endogenous Misspecified Learning," Econometrica, Econometric Society, vol. 89(3), pages 1065-1098, May.
    5. Mira Frick & Ryota Iijima & Yuhta Ishii, 2021. "Welfare Comparisons for Biased Learning," Cowles Foundation Discussion Papers 2274, Cowles Foundation for Research in Economics, Yale University.
    6. Carbajal, Juan Carlos & Nachbar, John, 2025. "Robust personal equilibrium effects in misspecified causal models," Journal of Mathematical Economics, Elsevier, vol. 118(C).

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