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On the Evolution of Pareto-Optimal Behavior in Repeated Coordination Problems

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  • Lagunoff, Roger

Abstract

I characterize the asymptotic behavior of a society facing a repeated-common-interest game. In this society, new individuals enter to replace their "parents" at random times. Each entrant has possibly different beliefs about others' behavior than his or her predecessor. A self-confirming equilibrium (SCE) belief process describes an evolution of beliefs in this society consistent with a self-confirming equilibrium of the repeated game. The main result shows that for any common-interest game, the Pareto-dominant equilibrium is a globally absorbing state of the behavioral dynamics when the SCE beliefs of new entrants satisfy certain independence and full-support properties. This result does not involve either of the usual assumptions of myopia or large inertia common in evolutionary models, nor is this result possible if only Nash rather than self-confirming equilibria are considered. Copyright 2000 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Suggested Citation

  • Lagunoff, Roger, 2000. "On the Evolution of Pareto-Optimal Behavior in Repeated Coordination Problems," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(2), pages 273-293, May.
    • Handle: RePEc:ier:iecrev:v:41:y:2000:i:2:p:273-93
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    Cited by:

    1. John P. Conley & Myrna Wooders, 2005. "Memetics & Voting: How Nature May Make us Public Spirited," Vanderbilt University Department of Economics Working Papers 0514, Vanderbilt University Department of Economics.
    2. Antoci, Angelo & Gay, Antonio & Landi, Massimiliano & Sacco, Pier Luigi, 2008. "Global analysis of an expectations augmented evolutionary dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 32(12), pages 3877-3894, December.
    3. Shota Fujishima, 2015. "The emergence of cooperation through leadership," International Journal of Game Theory, Springer;Game Theory Society, vol. 44(1), pages 17-36, February.
    4. Angelo Antoci & Massimiliano Landi & Pier Luigi Sacco, 2006. "Expectations, Animal Spirits, and Evolutionary Dynamics," Working Papers 10-2006, Singapore Management University, School of Economics.
    5. Fay, Scott, 2008. "Selling an opaque product through an intermediary: The case of disguising one's product," Journal of Retailing, Elsevier, vol. 84(1), pages 59-75.
    6. John Conley & Myrna H. Wooders & Ali Toossi, 2001. "Evolution & Voting: How Nature Makes us Public Spirited," Economics Bulletin, AccessEcon, vol. 28(24), pages 1.

    More about this item

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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