SSE/EFI Working Paper Series in Economics and Finance,
Stockholm School of Economics

Abstract: In this paper we model an evolutionary process with perpetual random shocks where individual behavior is determined by imitation. Every period an agent is randomly chosen from each of n finite populations to play a game. Each agent observes a sample of population-specific past strategy and payoff realizations. She thereafter imitates by choosing the strategy with highest average payoff in the sample. Occasionally the agents also experiment or make mistakes and choose a strategy at random. For finite n-player games we prove that in the limit, as the probability of experimentation tends to zero, only strategy-tuples in minimal sets closed under the better-reply graph will be played with positive probability. If the strategy-tuples in one such minimal set have strictly higher payoffs than all outside strategy-tuples, then the strategy-tuples in this set will be played with probability one in the limit, provided the minimal set is a product set. We also show that in 2x2 games the convergence in our model is faster than in other known models.

Keywords: Evolutionary game theory; bounded rationality; imitation; Markov chain; stochastic stability; better replies; Pareto dominance

JEL-codes: C72; C73

33 pages, First version: March 9, 2000. Revised: November 27, 2002. Earlier revisions: November 26, 2002.

Full text files

hastef0363.pdf  Full text

Download statistics

• Stockholm School of Economics
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Helena Lundin ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:hastef:0363This page generated on 2024-09-13 22:15:05.