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A Trade Network Game with Endogenous Partner Selection

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  • Tesfatsion, Leigh

Abstract

This paper develops a Trade Network Game (TNG) that combines evolution ary game play with endogenous partner selection. Resource-constrained buyers and sellers choose and refuse trade partners on the basis of continually updated expected payoffs. Partner selection takes place in accordance with a "deferred choice and refusal" mechanism that is shown to have interesting stability, optimality, and uniqueness properties. The iterated prisoner's dilemma strategies used by buyers and sellers to conduct their trades are evolved over time via a genetic algorithm that biases reproduction in favor of strategies that have been successful in past trades..

Suggested Citation

  • Tesfatsion, Leigh, 1995. "A Trade Network Game with Endogenous Partner Selection," ISU General Staff Papers 199505010700001034, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:199505010700001034
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    1. Alan P. Kirman, 1994. "Economies with Interacting Agents," Working Papers 94-05-030, Santa Fe Institute.
    2. Yannis M. Ioannides, 1996. "Evolution of Trading Structures," Working Papers 96-04-020, Santa Fe Institute.
    3. Roth, Alvin E. & Sotomayor, Marilda, 1992. "Two-sided matching," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541, Elsevier.
    4. Leigh TESFATSION, 1995. "A Trade Network Game With Endogenous Partner Selection," Economic Report 36, Iowa State University Department of Economics.
    5. George Mailath & Larry Samuelson & Avner Shaked, 1994. "Evolution and Endogenous Interactions," Game Theory and Information 9410003, University Library of Munich, Germany.
    6. William A. Brock & Steven N. Durlauf, 2001. "Discrete Choice with Social Interactions," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 68(2), pages 235-260.
    7. McFadzean, David & Tesfatsion, Leigh, 1999. "A C++ Platform for the Evolution of Trade Networks," Computational Economics, Springer;Society for Computational Economics, vol. 14(1-2), pages 109-134, October.
    8. Vriend, Nicolaas J, 1995. "Self-Organization of Markets: An Example of a Computational Approach," Computational Economics, Springer;Society for Computational Economics, vol. 8(3), pages 205-231, August.
    9. Stanley, E. Ann & Ashlock, Dan & Tesfatsion, Leigh, 1993. "Iterated Prisoner's Dilemma with Choice and Refusal of Partners," ISU General Staff Papers 199302010800001028, Iowa State University, Department of Economics.
    10. Ashlock, Dan & Smucker, Mark & Stanley, E. Ann & Tesfatsion, Leigh, 1994. "Preferential Partner Selection in an Evolutionary Study of Prisoner's Dilemma," ISU General Staff Papers 199409010700001033, Iowa State University, Department of Economics.
    11. Hirshlifer, David & Rassmusen, Eric, 1989. "Cooperation in a repeated prisoners' dilemma with ostracism," Journal of Economic Behavior & Organization, Elsevier, vol. 12(1), pages 87-106, August.
    12. William A. Brock & Steven N. Durlauf, 1995. "Discrete Choice with Social Interactions I: Theory," NBER Working Papers 5291, National Bureau of Economic Research, Inc.
    13. Sergei Guriev & Igor Pospelov & Margarita Shakhova, "undated". "Self-Organization of Trade Networks in an Economy with Imperfect Infrastructure," Computing in Economics and Finance 1996 _022, Society for Computational Economics.
    14. Esther Hauk, "undated". "Leaving the Prison: A Discussion of the Iterated Prisoner's Dilemma under Preferential Partner Selection," Computing in Economics and Finance 1996 _067, Society for Computational Economics.
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    More about this item

    JEL classification:

    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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