Peter Engseld: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
Abstract: The main purpose of this paper is to suggest a mechanism of coordination whereby concerns for high relative position might evolve endogenously. A simple symmetric 2 × 2 strategic coordination game is analyzed in an evolutionary environment where continua of bounded rational agents are randomly matched against each other. The agents are assumed to have the ability to make an imperfect observation on how their own status relates to that of their opponent. These observations are then utilized as an instrument for coordinating the strategies in the game by the conditioning of the pure strategies on whether the opponent has a higher status or a lower status. The outcome of the game is analyzed through a newly defined evolutionary criterion as the agent's observational skills come close to the limit of being perfect. It is shown that there exists an endogenous asymmetry in the model that results in just one of the conditioned strategies in the pure strategy set being evolutionary stable. Moreover, it is also shown that this strategy will prevail against strategies conditioned through other personal characteristics, e.g. size, and gender.
60 pages, July 14, 2003
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