Log-linear Dynamics and Local Potential

Daijiro Okada () and Olivier Tercieux
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Daijiro Okada: Rutgers

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: We show that local potential maximizer (\cite{morris+05}) with constant weights is stochastically stable in the log-linear dynamics provided that the payoff 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 different rates. For 2 player 2 action games, we examine a modified log-linear dynamics (relative log-linear dynamics) under which local potential maximizer with strictly positive weights is stochastically stable. This in particular implies that for 2 player 2 action games a strict (p1,p2)-dominant equilibrium with p1+p2

Keywords: Log-linear dynamics; Stochastic stability; Local potential maximizer; Equilibrium selection; Comparison of Markov Chains (search for similar items in EconPapers)
JEL-codes: C72 C73 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2008-12-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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http://www.sas.rutgers.edu/virtual/snde/wp/2008-07.pdf (application/pdf)

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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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:200807

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