Tempered Best Response Dynamics
No 1301, DETU Working Papers from Department of Economics, Temple University
We propose a new deterministic evolutionary dynamicâ€”the tempered best response dynamic (tBRD)---to capture two features of economic decision making: optimization and continuous sensitivity to incentives. That is, in the tBRD, an agent is more likely to revise his action when his current payoff is further from the optimal payoff, and he always switches to an optimal action when revising. The tBRD is a payoff monotone selection like the replicator dynamic, which makes medium and long-run outcomes more consistent with predictions from equilibrium refinement than the BRD in some situations. The technical contribution of the tBRD is continuous sensitivity, which allows us to apply results of a system of piecewise differential equations in order to obtain conditions for uniqueness and stability of solutions.
Keywords: best response dynamic; payoff monotonicity; status-quo bias; switching costs; proper equilibrium; piecewise differential equations (search for similar items in EconPapers)
JEL-codes: C62 C73 D03 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-evo and nep-mic
References: View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
http://www.cla.temple.edu/RePEc/documents/DETU_13_01.pdf First version, 2013 (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tem:wpaper:1301
Access Statistics for this paper
More papers in DETU Working Papers from Department of Economics, Temple University Contact information at EDIRC.
Bibliographic data for series maintained by Dimitrios Diamantaras ().