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In and out of equilibrium II: Evolution in repeated games with discounting and complexity costs

Matthijs van Veelen and Julián García

Games and Economic Behavior, 2019, vol. 115, issue C, 113-130

Abstract: We explore evolutionary dynamics for repeated games with small, but positive complexity costs. We begin by extending a folk theorem result by Cooper (1996) to continuation probabilities, or discount rates, smaller than 1. Then we show that All D has a uniform invasion barrier. Since none of the more cooperative equilibria are robust against indirect invasions, we might expect not to observe any cooperative equilibria when complexity costs are positive. The average level of cooperation in the dynamics, however, can hover anywhere between no cooperation at all, and the average level of cooperation in the absence of complexity costs, depending on how small complexity costs are and how large the population is.

Keywords: Repeated games; Complexity costs; Neutrally stable strategy; Robust against indirect invasions; Uniform invasion barrier; Wright-Fisher process (search for similar items in EconPapers)
JEL-codes: C73 (search for similar items in EconPapers)
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:115:y:2019:i:c:p:113-130

DOI: 10.1016/j.geb.2019.02.013

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