Equilibrium selection in generalized Polya-urn coordination games with partial information on population shares

Giorgio Fagiolo ()
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Giorgio Fagiolo: Institute of Economics, Sant'Anna School for Advanced Studies, Pisa, Italy

Economics Bulletin, 2025, vol. 45, issue 4, 1658 - 1665

Abstract: I investigate deterministic best-reply dynamics in generalized Polya-urn coordination games, where a Pareto dominant equilibrium coexists with a risk-dominant one and players have partial information on current population shares. After analytically deriving estimates for the basin of attraction of either equilibrium, I study numerically (and via simulation) equilibrium selection in the long run. Results indicate that risk dominance robustly prevails over Pareto efficiency as a selection principle. Furthermore, I find that the probability of selecting a Pareto-efficient outcome decreases the smaller the sample size drawn by entrants and increases the larger the initial pool of incumbents.

Keywords: Polya-Urn Models; Coordination Games; Equilibrium Selection; Risk Dominance; Pareto Efficiency (search for similar items in EconPapers)
JEL-codes: C6 C7 (search for similar items in EconPapers)
Date: 2025-12-30
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