Idiosyncratic and Aggregate Time-Varying Mutation Rates in Coordination Games

Harold Houba and Alexander Tieman

No 01-041/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We extend the standard evolutionary model of Kandori, Mailath, andRob (1993) to incorporate time-varying aggregate and idiosyncraticshocks separately in coordination games.We show that both types of shocks have a different effect on theinvariant distribution over the different equilibria of dthe game.While idiosyncratic shocks are shown to be neutral, the aggregateshocks introduce a systematic bias against the risk dominantequilibrium.Different from Kandori, Mailath, and Rob (1993) we derive a sufficient conditionunder which this bias prevents equilibrium selection with probability one.

Date: 2001-04-04
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20010041

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