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Idiosyncratic and Aggregate Time-Varying Mutation Rates in Coordination Games

Author

Listed:
  • Harold Houba

    (Vrije Universiteit Amsterdam)

  • Alexander F. Tieman

    (Vrije Universiteit Amsterdam, and De Nederlandsche Bank)

Abstract

We extend the standard evolutionary model of Kandori, Mailath, andRob (1993) to incorporate time-varying aggregate and idiosyncraticshocks separately in coordination games.We show that both types of shocks have a different effect on theinvariant distribution over the different equilibria of dthe game.While idiosyncratic shocks are shown to be neutral, the aggregateshocks introduce a systematic bias against the risk dominantequilibrium.Different from Kandori, Mailath, and Rob (1993) we derive a sufficient conditionunder which this bias prevents equilibrium selection with probability one.

Suggested Citation

  • Harold Houba & Alexander F. Tieman, 2001. "Idiosyncratic and Aggregate Time-Varying Mutation Rates in Coordination Games," Tinbergen Institute Discussion Papers 01-041/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20010041
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