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Equilibrium selection and the dynamic evolution of preferences

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  • Norman, Thomas W.L.

Abstract

A population of fully rational agents plays a symmetric 2-player game in biological fitnesses, but each agentʼs play is determined by his payoffs, which are free to evolve according to “survival of the fittest” pressures. An equilibrium-selection mechanism is assumed to exist, and deliver a unique outcome for any given profile of payoffs; this allows the evolution of payoffs to be modeled as a well-defined replicator dynamics. The existing static stability results that “efficient strict Nash implies stability” and “stability implies efficiency” are translated to this dynamic context, although the latter gives way to indeterminacy in the absence of a specific equilibrium-selection mechanism. A strong form of stability is established for the efficient outcome of games with common interests, whilst a weaker stability result is provided for efficient mixed-strategy equilibria of doubly symmetric games. The results are illustrated using the equilibrium-selection mechanism provided by global games.

Suggested Citation

  • Norman, Thomas W.L., 2012. "Equilibrium selection and the dynamic evolution of preferences," Games and Economic Behavior, Elsevier, vol. 74(1), pages 311-320.
    • Handle: RePEc:eee:gamebe:v:74:y:2012:i:1:p:311-320
    DOI: 10.1016/j.geb.2011.05.005
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    More about this item

    Keywords

    Evolution; Preferences; Equilibrium selection;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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