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Endogenous Networks in Random Population Games

Author

Listed:
  • Giorgio Fagiolo
  • Luigi Marengo
  • Marco Valente

Abstract

Population learning in dynamic economies has been traditionally studied in over-simplified settings where payoff landscapes are very smooth. Indeed, in these models, all agents play the same bilateral stage-game against any opponent and stage-game payoffs reflect very simple strategic situations (e.g. coordination). In this paper, we address a preliminary investigation of dynamic population games over `rugged' landscapes, where agents face a strong uncertainty about expected payoffs from bilateral interactions. We propose a simple model where individual payoffs from playing a binary action against everyone else are distributed as a i.i.d. U[0,1] r.v.. We call this setting a `random population game' and we study population adaptation over time when agents can update both actions and partners using deterministic, myopic, best reply rules. We assume that agents evaluate payoffs associated to networks where an agent is not linked with everyone else by using simple rules (i.e. statistics) computed on the distributions of payoffs associated to all possible action combinations performed by agents outside the interaction set. We investigate the long-run properties of the system by means of computer simulations. We show that: (i) allowing for endogenous networks implies higher average payoff as compared to "frozen" networks; (ii) the statistics employed to evaluate payoffs strongly affect the efficiency of the system, i.e. convergence to a unique (multiple) steady-state(s) or not; (iii) for some class of statistics (e.g. MIN or MAX), the likelihood of efficient population learning strongly depends on whether agents are change-averse or not in discriminating between options delivering the same expected payoff.

Suggested Citation

  • Giorgio Fagiolo & Luigi Marengo & Marco Valente, 2003. "Endogenous Networks in Random Population Games," LEM Papers Series 2003/03, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  • Handle: RePEc:ssa:lemwps:2003/03
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    References listed on IDEAS

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    3. A. Pyka & G. Fagiolo, 2007. "Agent-based Modelling: A Methodology for Neo-Schumpetarian Economics," Chapters, in: Horst Hanusch & Andreas Pyka (ed.), Elgar Companion to Neo-Schumpeterian Economics, chapter 29, Edward Elgar Publishing.
    4. Paul Windrum & Giorgio Fagiolo & Alessio Moneta, 2007. "Empirical Validation of Agent-Based Models: Alternatives and Prospects," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 10(2), pages 1-8.
    5. Giorgio Fagiolo & Alessio Moneta & Paul Windrum, 2007. "A Critical Guide to Empirical Validation of Agent-Based Models in Economics: Methodologies, Procedures, and Open Problems," Computational Economics, Springer;Society for Computational Economics, vol. 30(3), pages 195-226, October.

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    More about this item

    Keywords

    Dynamic Population Games; Bounded Rationality; Endogenous Networks; Fitness Landscapes; Evolutionary Environments; Adaptive Expectations.;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General

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