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Expectations, Animal Spirits, and Evolutionary Dynamics

Author

Listed:
  • Angelo Antoci

    () (University of Sassari)

  • Massimiliano Landi

    () (School of Economics and Social Sciences, Singapore Management University)

  • Pier Luigi Sacco

    () (IUAV, Venice)

Abstract

We consider a (deterministic) evolutionary model where players have dynamic expectations about the strategy distribution. We provide a global analysis of the co-evolution of play and expectations for a generic two{by{two game. Besides the the typical indeterminacy of the evolutionary dynamics, we find some other ones: for any initial strategy configuration the dynamics can converge to any asymptotically stable fixed point, for different initial values of the expectations. Moreover, starting from the same initial pair of strategy configuration and values of expectations, the dynamics may lead to different asymptotically stable fixed points for different parameters of the expectations.

Suggested Citation

  • Angelo Antoci & Massimiliano Landi & Pier Luigi Sacco, 2006. "Expectations, Animal Spirits, and Evolutionary Dynamics," Working Papers 10-2006, Singapore Management University, School of Economics.
  • Handle: RePEc:siu:wpaper:10-2006
    as

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    References listed on IDEAS

    as
    1. Diamond, Peter & Fudenberg, Drew, 1989. "Rational Expectations Business Cycles in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 606-619, June.
    2. John Conlisk, 2001. "Costly Predation and the Distribution of Competence," American Economic Review, American Economic Association, vol. 91(3), pages 475-484, June.
    3. Kiminori Matsuyama, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 617-650.
    4. Matsui Akihiko & Matsuyama Kiminori, 1995. "An Approach to Equilibrium Selection," Journal of Economic Theory, Elsevier, vol. 65(2), pages 415-434, April.
    5. Burdzy, Krzysztof & Frankel, David M & Pauzner, Ady, 2001. "Fast Equilibrium Selection by Rational Players Living in a Changing World," Econometrica, Econometric Society, vol. 69(1), pages 163-189, January.
    6. Lagunoff, Roger, 2000. "On the Evolution of Pareto-Optimal Behavior in Repeated Coordination Problems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 273-293, May.
    7. Matsui, Akihiko & Oyama, Daisuke, 2006. "Rationalizable foresight dynamics," Games and Economic Behavior, Elsevier, vol. 56(2), pages 299-322, August.
    8. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 651-667.
    9. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-666, May.
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    More about this item

    Keywords

    evolutionary games; dynamic systems; animal spirits;

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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