A Deterministic Approximation Approach to the Continuum Logit Dynamic with an Application to Supermodular Games

Ratul Lahkar (ratul.lahkar@asoka.edu.in), Sayan Mukherjee (sayanmukherjee012@gmail.com) and Souvik Roy (souvik.2004@gmail.com)
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Ratul Lahkar: Ashoka University
Sayan Mukherjee: ISI Kolkata
Souvik Roy: ISI, Kolkata

No 79, Working Papers from Ashoka University, Department of Economics

Abstract: We consider the logit dynamic in a large population game with a continuum of strategies. The deterministic approximation approach requires us to derive this dynamic as the finite horizon limit of a stochastic process in a game with a finite but large number of strategies and players. We first establish the closeness of this dynamic with a step–wise approximation. We then show that the logit stochastic process is close to the step–wise logit dynamic in a discrete approximation of the original game. Combining the two results, we obtain our deterministic approximation result. We apply the result to large population supermodular games with a continuum of strategies. Over finite but sufficiently long time horizons, the logit stochastic process converges to logit equilibria in a discrete approximation of the supermodular game. By the deterministic approximation approach, so does the logit dynamic in the continuum supermodular game

Pages: 31
Date: 2022-04-26
New Economics Papers: this item is included in nep-dcm and nep-gth
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