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An Evolutionary Analysis of Bagwell's Example

  • Jorg Oechssler

    (Humboldt University, Berlin)

  • Karl Schlag

    (University of Bonn)

In a recent paper Bagwell (1995) pointed out that only the Cournot outcome, but not the Stackelberg outcome, can be supported by a pure Nash equilibrium when actions of the Stackelberg leader are observed with the slightest error. The Stackelberg outcome, however, remains close to the outcome of a mixed equilibrium. We compare the predictions in various classes of evolutionary and learning processes in this game. Only the continuous best response dynamic uniquely selects the Stackelberg outcome under noise. All other dynamics analyzed allow for the Cournot equilibrium to be selected. In typical cases Cournot is the unique long run outcome even for vanishing noise in the signal.

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Paper provided by EconWPA in its series Game Theory and Information with number 9704001.

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Date of creation: 05 Apr 1997
Date of revision: 11 Apr 1997
Handle: RePEc:wpa:wuwpga:9704001
Note: Pages: 19
Contact details of provider: Web page: http://128.118.178.162

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  16. Samuelson Larry, 1994. "Stochastic Stability in Games with Alternative Best Replies," Journal of Economic Theory, Elsevier, vol. 64(1), pages 35-65, October.
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