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On the existence and stability of Pareto optimal endogenous matching with fairness

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  • Dai, Darong

Abstract

In the current paper, we study the asymmetric normal-form game between two heterogeneous groups of populations by employing the stochastic replicator dynamics driven by Lévy process. A new game equilibrium, i.e., the game equilibrium of a stochastic differential cooperative game on time, is derived by introducing optimal-stopping technique into evolutionary game theory, which combines with the Pareto optimal standard leads us to the existence of Pareto optimal endogenous matching. Moreover, stability of the Pareto optimal endogenous matching is confirmed by essentially using the well-known Girsanov Theorem.

Suggested Citation

  • Dai, Darong, 2012. "On the existence and stability of Pareto optimal endogenous matching with fairness," MPRA Paper 40457, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:40457
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    References listed on IDEAS

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    More about this item

    Keywords

    Stochastic differential cooperative game on time; Pareto optimal endogenous matching; Stable matching; Fairness; Induced game equilibrium; Stochastic replicator dynamics; Adaptive learning;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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