 Does eductive stability imply evolutionary stability?Cars Hommes and Florian Wagener Journal of Economic Behavior & Organization, 2010, vol. 75, issue 1, 25-39 Abstract: This note presents a simple example of a model in which the unique rational expectations (RE) steady state equilibrium is eductively stable in the sense of Guesnerie (2002), but where evolutionary learning, as introduced in Brock and Hommes (1997), does not necessarily converge to the RE steady state price. The example is a Muthian cobweb model where producers have heterogeneous expectations and select forecasting strategies based upon recent realized profits. By means of a simple three types example we show that a locally stable RE fundamental steady state may co-exists with a locally stable two-cycle. We also study the Muthian model with a large number of different producer types, and investigate conditions under which an evolutionary adaptive learning process based upon recent realized profits enforces global convergence to the stable RE steady state and when persistent periodic price fluctuations can arise. Keywords: Muthian; cobweb; model; Evolutionary; learning; Adaptive; learning; Large; type; limit (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:75:y:2010:i:1:p:25-39 Access Statistics for this article Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D. More articles in Journal of Economic Behavior & Organization from Elsevier |
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