IMPLEMENTATION, ELIMINATION OF WEAKLY DOMINATED STRATEGIES AND EVOLUTIONARY DYNAMICS

Antonio Cabrales and Giovanni Ponti ()

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

Abstract: This paper studies convergence and stability properties of Sjöström's (1994) mechanism, under the assumption that boundedly rational players find their way to equilibrium using monotonic learning dynamics and best-reply dynamics. This mechanism implements most social choice functions in economic environments using as a solution concept one round of deletion of weakly dominated strategies and one round of deletion of strictly dominated strategies. However, there are other sets of Nash equilibria, whose payoffs may be very different from those desired by the social choice function. With monotonic dynamics, all these sets of equilibria contain limit points of the learning dynamics. Furthermore, even if the dynamics converge to the "right" set of equilibria (i.e. the one which contains the solution of the mechanism), it may converge to an equilibrium which is worse in welfare terms. In contrast with this result, any interior solution of the best-reply dynamics converges to the equilibrium whose outcome the planner desires.

Keywords: Implementation Theory; Evolutionary Dynamics (search for similar items in EconPapers)
JEL-codes: C72 D70 D78 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2000-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Published by Ivie

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http://www.ivie.es/downloads/docs/wpasad/wpasad-2000-18.pdf Fisrt version / Primera version, 2000 (application/pdf)

Related works:
Journal Article: Implementation, Elimination of Weakly Dominated Strategies and Evolutionary Dynamics (2000)
Working Paper: Implementation, elimination of weakly dominated strategies and evolutionary dynamics (1997)
Working Paper: Implementation, Elimination of Weakly Dominated Strategies and Evolotionary Dynamics
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Persistent link: https://EconPapers.repec.org/RePEc:ivi:wpasad:2000-18

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