SPLITTING THE BABY IN TWO: HOW TO SOLVE SOLOMON'S DILEMMA WHEN AGENTS ARE BOUNDEDLY RATIONAL

Giovanni Ponti ()

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We study the dynamic implementation of the first-best for King Solomon's Dilemma, on the assumption that boundedly rational players find their way to equilibrium using monotonic evolutionary dynamics, and also with best-reply dynamics. We find that, although the mechanisms proposed by the literature are dynamically implementable with best-reply dynamics, the same does not hold when monotonic dynamics are considered. To solve this problem, we propose an alternative mechanism, whose game-form is still implementable in the traditional sense. However, it is also dynamically implementable, as every interior path of the adjustment pro-cesses we consider converges to the first-best, which is also asymptotically stable.

JEL-codes: C72 D78 D83 (search for similar items in EconPapers)
Pages: 17 pages
Date: 2000-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2000-08

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