Long-run equilibria, dominated strategies, and local interactions
The present note revisits a result by Kim and Wong (2010) showing that any strict Nash equilibrium of a coordination game can be supported as a long run equilibrium by properly adding dominated strategies. We show that in the circular city model of local interactions the selection of 1/2 -dominant strategies remains when adding strictly dominated strategies if interaction is decentral". Conversely, if the local interaction structure is central" by adding properly suited dominated strategies any equilibrium strategy of the original game can be supported as long run equilibrium. Classification- JEL: C72, D83
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