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Evolutionary stability and Nash equilibrium in finite populations, with an application to price competition

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Abstract

Schaffer (1988) proposed a concept of evolutionary stability for finite-population models that has interesting implications in economic models of evolutionary learning, since it is related to perfectly competitive equilibrium. The present paper explores the relation of this concept to Nash equilibrium in particular classes of games, including constant-sum games, games with weak payoff externalities, and games where imitative decision rules are individually improving. An illustration of the latter is provided in the context of Bertrand oligopoly with homogeneous product which allows for a characterization of the set of evolutionarily stable prices.

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  • Ana B. Ania, 2005. "Evolutionary stability and Nash equilibrium in finite populations, with an application to price competition," Vienna Economics Papers vie0601, University of Vienna, Department of Economics.
    • Handle: RePEc:vie:viennp:vie0601
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    More about this item

    JEL classification:

    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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