On the Co-existence of Conventions

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Abstract

Recent stochastic evolutionary models have shown that the most likely outcome when the probability of a mutation is sufficiently small is coordination on the risk-dominant strategy rather than on the payoff-dominant one. This paper looks at the consequences of player movement between locations when there are constraints which limit the number of agents who can reside at each location. If the constraints are tight then the risk-dominance result continues to hold. However, we show that when sufficient movement is possible, the most likely outcome involves a mixed state in which agents at different locations coordinate on different strategies. In the asymmetric case, it is the location with the tighter constraint that coordinates on the payoff-dominant strategy. Journal of Economic Literature Classification Numbers: C72, C73, D83.
Original languageEnglish
Pages (from-to)145-155
Number of pages11
JournalJournal of Economic Theory
Volume107
Issue number1
DOIs
Publication statusPublished - 1 Nov 2002

Keywords

  • evolution
  • local interaction
  • equilibrium selection

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