An Evolutionary Analysis of Bagwell's Example

Jörg Oechssler and Karl Schlag

Game Theory and Information from University Library of Munich, Germany

Abstract: In a recent paper Bagwell (1995) pointed out that only the Cournot outcome, but not the Stackelberg outcome, can be supported by a pure Nash equilibrium when actions of the Stackelberg leader are observed with the slightest error. The Stackelberg outcome, however, remains close to the outcome of a mixed equilibrium. We compare the predictions in various classes of evolutionary and learning processes in this game. Only the continuous best response dynamic uniquely selects the Stackelberg outcome under noise. All other dynamics analyzed allow for the Cournot equilibrium to be selected. In typical cases Cournot is the unique long run outcome even for vanishing noise in the signal.

Keywords: imperfectly observable commitment; evolution; imitation; learning; equilibrium selection (search for similar items in EconPapers)
JEL-codes: C72 C73 (search for similar items in EconPapers)
Date: 1997-04-05, Revised 1997-04-11
Note: Pages: 19
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Citations: View citations in EconPapers (6)

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