Stability of Equilibria in Games with Procedurally Rational Players

Rajiv Sethi ()

Game Theory and Information from University Library of Munich, Germany

Abstract: One approach to the modeling of bounded rationality in strategic environments is based on the dynamics of evolution and learning in games. An entirely different approach has been developed recently by Osborne and Rubinstein (1998). This latter approach is static and equilibrium based, but relies on less stringent assumptions regarding the knowledge and understanding of players than does the standard theory of Nash equilibrium. This paper formalizes Osborne and Rubinstein's dynamic interpretation of their equilibrium concept and thereby facilitates a comparison of this approach with the explicitly dynamic approach of evolutionary game theory. It turns out that the two approaches give rise to radically different static and dynamic predictions. For instance, dynamically stable equilibria can involve the playing of strictly dominated actions, and equilibria in which strictly actions are played with probability 1 can be unstable. Sufficient conditions for the instability of equilibria are provided for symmetric and asymmetric games.

Keywords: Dynamic Stability; S(1) Equilibrium; Procedural Rationality; Evolutionary Games (search for similar items in EconPapers)
JEL-codes: C72 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1998-11-16, Revised 1999-03-04
New Economics Papers: this item is included in nep-evo and nep-gth
Note: Type of Document - Tex; prepared on IBM PC; to print on HP/PostScript; pages: 23; figures: included
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Stability of Equilibria in Games with Procedurally Rational Players (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpga:9811003

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