Sophisticated imitation in cyclic games |
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| Authors: | Josef Hofbauer Karl H Schlag |
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| Institution: | (1) Department of Mathematics, University of Vienna, Strudlhofgasse 4, A-1090 Wien, Austria (e-mail: josef.hofbauer@univie.ac.at), AT;(2) Economics Department, European University Institute, Via dei Roccettini 9, 50016 San Domenico di Fiesole, Italy (e-mail: schlag@iue.it), IT |
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| Abstract: | Individuals belonging to two large populations are repeatedly randomly matched to play a cyclic game such as Matching Pennies. Between matching rounds, individuals sometimes change their strategy after observing a finite
sample of other outcomes within their population. Individuals from the same population follow the same behavioral rule. In
the resulting discrete time dynamics the unique Nash equilibrium is unstable. However, for sample sizes greater than one,
we present an imitation rule where long run play cycles closely around the equilibrium. |
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| Keywords: | : Strictly improving – Matching pennies game – Replicator dynamics – Limit cycle – Discretization |
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