p-Dominance and Equilibrium Selection under Perfect Foresight Dynamics |
| |
Authors: | Daisuke Oyama |
| |
Institution: | Graduate School of Economics, University of Tokyo, Hongo, Bunkyo-ku, Tokyo, 113-0033, Japanf1doyama@grad.e.u-tokyo.ac.jpf1 |
| |
Abstract: | This paper studies equilibrium selection based on a class of perfect foresight dynamics and relates it to the notion of p-dominance. A continuum of rational players is repeatedly and randomly matched to play a symmetric n×n game. There are frictions: opportunities to revise actions follow independent Poisson processes. The dynamics has stationary states, each of which corresponds to a Nash equilibrium of the static game. A strict Nash equilibrium is linearly stable under the perfect foresight dynamics if, independent of the current action distribution, there exists a consistent belief that any player necessarily plays the Nash equilibrium action at every revision opportunity. It is shown that a strict Nash equilibrium is linearly stable under the perfect foresight dynamics with a small degree of friction if and only if it is the p-dominant equilibrium with p<1/2. It is also shown that if a strict Nash equilibrium is the p-dominant equilibrium with p<1/2, then it is uniquely absorbing (and globally accessible) for a small friction (but not vice versa). Set-valued stability concepts are introduced and their existence is shown. Journal of Economic Literature Classification Numbers: C72, C73. |
| |
Keywords: | equilibrium selection perfect foresight dynamics linear stability p-dominance |
本文献已被 ScienceDirect 等数据库收录! |
|