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Heterogeneity, Local Information, and Global Interaction

Aleksander Berentsen (), Esther Bruegger and Simon Loertscher

No 182, IEW - Working Papers from Institute for Empirical Research in Economics - University of Zurich

Abstract: Consider a society where all agents initially play "fair" and one agent invents a "cheating" strategy such as doping in sports. Which factors determine the success of the new cheating strategy? In order to study this question we consider an evolutionary game with heterogenous agents who can either play fair or cheat. We model heterogeneity by assuming that the players are either high or low types. Three factors determine the imitation dynamics of the model: the location and the type of the innovator, the distribution of types, and the information available to the agents. In particular we find that the economy is more likely to end up in a state where all agents cheat if the innovator is of low type or when the agents are maximally segregated.

Keywords: Evolutionary game theory; imitation dynamics; heterogeneity; local information; global interaction. (search for similar items in EconPapers)
JEL-codes: C70 C79 D83 (search for similar items in EconPapers)
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