TY - BOOK

T1 - Stochastic Strategy Adjustment in Coordination Games

AU - Kosfeld, M.

N1 - Pagination: 18

PY - 1999

Y1 - 1999

N2 - We explore a model of equilibrium selection in coordination games, where agents stochastically adjust their strategies to changes in their local environment. Instead of playing perturbed best-response, we assume that agents follow a rule of "switching to better strategies more likely". We relate this behavior to work of Rosenthal (1989) and Schlag (1998). Our main results are that both strict Nash equilibria of the coordination game correspond to stationary distributions of the process, hence evolution of play is not ergodic, but instead depends on initial conditions. However, coordination on the risk-dominant equilibrium occurs with probability one whenever the initial share of agents playing the risk-dominant strategy has at least some positive measure, how ever small, within the whole population.

AB - We explore a model of equilibrium selection in coordination games, where agents stochastically adjust their strategies to changes in their local environment. Instead of playing perturbed best-response, we assume that agents follow a rule of "switching to better strategies more likely". We relate this behavior to work of Rosenthal (1989) and Schlag (1998). Our main results are that both strict Nash equilibria of the coordination game correspond to stationary distributions of the process, hence evolution of play is not ergodic, but instead depends on initial conditions. However, coordination on the risk-dominant equilibrium occurs with probability one whenever the initial share of agents playing the risk-dominant strategy has at least some positive measure, how ever small, within the whole population.

KW - noncooperative games

KW - equilibrium theory

KW - strategy

KW - stochastic processes

KW - coordination

M3 - Report

VL - 775

T3 - FEW Research Memorandum

BT - Stochastic Strategy Adjustment in Coordination Games

PB - Microeconomics

CY - Tilburg

ER -