On the Relationship between Risk-Dominance and Stochastic Stability |
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Authors: | Toshimasa Maruta |
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Institution: | MEDS Department, J. L. Kellogg Graduate School of Management, Northwestern University, 2001 Sheridan Road, Evanston, Illinois, 60208 |
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Abstract: | In a 2 × 2 symmetric game with two symmetric equilibria, one risk-dominates another if and only if the equilibrium strategy is a unique best response to any mixture that gives itself at least a probability of one-half. In a two-person strategic form game, we call a Nash equilibriumglobally risk-dominantif it consists of strategies such that each one of them is a unique best response to any mixture that gives the other at least a probability of one-half. We show that if a weakly acyclic two-person game has a globally risk-dominant equilibrium, then this is the one that is selected by the stochastic equilibrium selection process of Young.Journal of Economic LiteratureClassification Numbers: C72, C73. |
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