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An Approach to Equilibrium Selection

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  • Akihiko Matsui
  • Kiminori Matsuyama

Abstract

We consider equilibrium selection in 2x2 bimatrix games with two strict Nash equilibria in a random matching framework. The players seek to maximize the discounted payoffs, but are restricted to make a short run commitment. Modeling the friction this way yields equilibrium dynamics of the behavior patters in the society. We define and characterize an absorbing and globally attractive state in this dynamics. It is shown that, as friction becomes arbitrarily small, a strict Nash equilibrium outcome becomes unique absorbing and globally attractive if and only if it satisfies the Harsanyi/Selton notion of risk-dominance criterion.

Suggested Citation

  • Akihiko Matsui & Kiminori Matsuyama, 1990. "An Approach to Equilibrium Selection," Discussion Papers 970, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:970
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    References listed on IDEAS

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    More about this item

    Keywords

    Equilibrim Selection; Random Matching Games; risk-dominance;
    All these keywords.

    JEL classification:

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

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