Scandinavian Working Papers in Economics

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

No 474: A Numerical Analysis of the Evolutionary Stability of Learning Rules

Jens Josephson ()
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Jens Josephson: Dept. of Economics, Stockholm School of Economics, Postal: Stockholm School of Economics, P.O. Box 6501, S-113 83 Stockholm, Sweden

Abstract: In this paper I define an evolutionary stability criterion for learning rules. Using Monte Carlo simulations, I then apply this criterion to a class of learning rules that can be represented by Camerer and Ho's (1999) model of learning. This class contains perturbed versions of reinforcement and belief learning as special cases. A large population of individuals with learning rules in this class are repeatedly rematched for a finite number of periods and play one out of four symmetric two-player games. Belief learning is the only learning rule which is evolutionarily stable in almost all cases, whereas reinforcement learning is unstable in almost all cases. I also find that in certain games, the stability of intermediate learning rules hinges critically on a parameter of the model and the relative payoffs.

Keywords: Bounded rationality; Evolutionary game theory; Evolutionary Stability; Learning in games; Belief learning; Reinforcement learning.

JEL-codes: C72; C73

29 pages, November 15, 2001

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