Noise Matters in Heterogeneous Populations

Tom Quilter

Research output: Working paperDiscussion paper

Abstract

The concept of boundedly rational agents in evolutionary game theory
has succeeded in producing clear results when traditional methodology
was failing. However the majority of such papers have obtained their
results when this bounded rationality itself vanishes. This paper considers
whether such results are actually a good reflection of a population
whose bounded rationality is small, but non-vanishing. We also look at
a heterogenous population who play a co-ordination game but have con-
flicting interests, and investigate the stability of an equilibria where two
strategies co-exist together. Firstly, I find that results using the standard
vanishing noise approach can be very different from those obtained when
noise is small but persistent. Secondly, when the results differ it is the
non-vanishing noise approach which selects the co-existence equilibria.
As recent economic and psychology studies highlight the irrationality
of their human subjects, this paper seeks to further demonstrate that
the literature needs to concentrate more on the analysis of truly noisy
populations.
Original languageEnglish
PublisherEdinburgh School of Economics Discussion Paper Series
Number of pages42
Publication statusPublished - 23 Aug 2007
Externally publishedYes

Publication series

NameESE Discussion Papers
No.169

Keywords

  • non-vanishing noise
  • equilibrium selection
  • strategy co-existence

Fingerprint Dive into the research topics of 'Noise Matters in Heterogeneous Populations'. Together they form a unique fingerprint.

Cite this