Log-linear Dynamics and Local Potential

Daijiro Okada () and Olivier Tercieux
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Daijiro Okada: Department of Economics, Rutgers, The State University of New Jersey

No 85, Economics Working Papers from Institute for Advanced Study, School of Social Science

Abstract: We show that local potential maximizer ([15]) with constant weights is stochas- tically stable in the log-linear dynamics provided that the payo® function or the associated local potential function is supermodular. We illustrate and discuss, through a series of examples, the use of our main results as well as other concepts closely related to local potential maximizer: weighted potential maximizer, p- dominance. We also discuss the log-linear processes where each player's stochastic choice rule converges to the best response rule at di®erent rates. For 2£2 games, we examine a modi¯ed log-linear dynamics (relative log-linear dynamics) under which local potential maximizer with strictly positive weights is stochastically sta- ble. This in particular implies that for 2 £ 2 games a strict (p1; p2)-dominant equilibrium with p1 + p2

Keywords: Log-linear dynamics; Relative log-linear dynamics; Stochastic stability; local potential maximizer; p-dominant equilibrium; equilibrium selection; stochastic order; comparison of Markov chains (search for similar items in EconPapers)
JEL-codes: C72 C73 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2008-11
New Economics Papers: this item is included in nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Log-linear dynamics and local potential (2012)
Working Paper: Log-linear dynamics and local potential (2012)
Working Paper: Log-linear Dynamics and Local Potential (2008)
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