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Escape dynamics and equilibria selection by iterative cycle decomposition

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  • Cui, Zhiwei
  • Zhai, Jian

Abstract

This paper explores the medium-run behaviour of bounded rational players in repeatedly played games when they occasionally experiment or make mistakes. The formal analysis introduces a hierarchical structure of limit sets to characterize the most possible medium-run behaviour over gradually increased time intervals. The paper refines the notion of stochastic stability and offers a precise measure of the speed at which stochastically stable equilibria occur. Finally, the paper applies the results to a 3x3 symmetric game of Young (1993).

Suggested Citation

  • Cui, Zhiwei & Zhai, Jian, 2010. "Escape dynamics and equilibria selection by iterative cycle decomposition," Journal of Mathematical Economics, Elsevier, vol. 46(6), pages 1015-1029, November.
    • Handle: RePEc:eee:mateco:v:46:y:2010:i:6:p:1015-1029
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    References listed on IDEAS

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    5. Zhang Xu & Wei Zhao, 2024. "On Mechanism Underlying Algorithmic Collusion," Papers 2409.01147, arXiv.org.

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