Muddling Through: Moisy Equlibrium Selection

Ken Binmore and Larry Samuelson

ELSE working papers from ESRC Centre on Economics Learning and Social Evolution

Abstract: This paper examines an evolutionary model in which the primary source of noise that moves the model between equilibria is not arbitrarily improbvable mutations but mistakes in learning. We model strategy selection as a birth-death process, allowing us to and a simple, closed-form solution for the stationary distribution of the model even though we take the noise to be bounded away from zero. We examine equilibrium selection by considering the limiting case as the population gets large, eliminating aggregate noise from the model. Conditions are established under which the risk-dominant equilibrium in a 2 x 2 game is selected by the model as well as conditions under which the payoff-dominant equilibrium is selected.

Keywords: Equilibrium selection; Evolutionary games; Mutations; Risk dominance. (search for similar items in EconPapers)
JEL-codes: C70 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:els:esrcls:036

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