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Loss of commitment? An evolutionary analysis of Bagwell's example

Listed author(s):
  • Oechssler, Jörg
  • Schlag, Karl H.

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 Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes in its series SFB 373 Discussion Papers with number 1997,39.

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Date of creation: 1997
Handle: RePEc:zbw:sfb373:199739
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  1. Dan Friedman, 2010. "Evolutionary Games in Economics," Levine's Working Paper Archive 392, David K. Levine.
  2. van Damme, E.E.C. & Hurkens, J.P.M., 1994. "Games with imperfectly observable commitment," Discussion Paper 1994-64, Tilburg University, Center for Economic Research.
  3. Karl H. Schlag, "undated". "Why Imitate, and if so, How? A Bounded Rational Approach to Multi- Armed Bandits," ELSE working papers 028, ESRC Centre on Economics Learning and Social Evolution.
  4. Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January.
  5. R. Cressman & K.H. Schlag, "undated". "The Dynamic (In)Stability of Backwards Induction," ELSE working papers 027, ESRC Centre on Economics Learning and Social Evolution.
  6. P. Young, 1999. "The Evolution of Conventions," Levine's Working Paper Archive 485, David K. Levine.
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  8. Oechssler, Jorg, 1997. "An Evolutionary Interpretation of Mixed-Strategy Equilibria," Games and Economic Behavior, Elsevier, vol. 21(1-2), pages 203-237, October.
  9. Noeldecke,Georg & Samuelson,Larry, "undated". "An evolutionary analysis of backward and forward induction," Discussion Paper Serie B 228, University of Bonn, Germany.
  10. Matsui, Akihiko, 1992. "Best response dynamics and socially stable strategies," Journal of Economic Theory, Elsevier, vol. 57(2), pages 343-362, August.
  11. Kyle Bagwell, 1992. "Commitment and Observability in Games," Discussion Papers 1014, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  12. Samuelson, Larry & Zhang, Jianbo, 1992. "Evolutionary stability in asymmetric games," Journal of Economic Theory, Elsevier, vol. 57(2), pages 363-391, August.
  13. Schlag, Karl H., 1994. "Why Imitate, and if so, How? Exploring a Model of Social Evolution," Discussion Paper Serie B 296, University of Bonn, Germany.
  14. John C. Harsanyi & Reinhard Selten, 1988. "A General Theory of Equilibrium Selection in Games," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262582384.
  15. Gale, John & Binmore, Kenneth G. & Samuelson, Larry, 1995. "Learning to be imperfect: The ultimatum game," Games and Economic Behavior, Elsevier, vol. 8(1), pages 56-90.
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  17. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-666, May.
  18. B. Adolph, 1996. "Commitment, Trembling Hand Imperfection and Observability in Games," SFB 373 Discussion Papers 1996,84, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
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