Journal of Economic Theory · 1995 · 201 citations · 0 references
Social SciencesEconomicsDecision TheoryGame TheoryMicroeconomicsCoordination GamesEvolutionary Game TheoryGeneral EquilibriumGeneral Equilibrium TheoryNash EquilibriumStrategic InteractionComputational Methods For EquilibriumGame-theoretic EvolutionNash Equilibrium ComputationNoncooperative GamesPure Coordination GameStrategic Complements
The evolutionary process is driven by players switching to the best response against the current strategy configuration and by experimentation with new strategies. The study extends the Kandori et al. evolutionary process to n × n games and proposes a general algorithm for computing the long‑run equilibrium (LRE). The algorithm computes the LRE by iteratively applying best‑response dynamics to n × n games and is then applied to two classes of economic games. The LRE exists uniquely even when the underlying game has multiple static equilibria; in pure coordination games it coincides with the Pareto‑efficient equilibrium, while in games with strategic complementarities the geometry of the best‑response correspondence facilitates its identification.
We extend the evolutionary process studied in Kandori et al., Econometrica 61 (1933), 29-56 to n × n games. The evolutionary process is driven by two forces: players switching to the best response against the present strategy configuration, and players experimenting with new strategies. We show that a unique behavior pattern, called the long-run equilibrium, arises even if the underlying game has multiple (static) equilibria. The paper gives a general algorithm for computing the LRE, and then applies it to two classes of economic games. For games of pure coordination, the LRE is the Pareto-efficient equilibrium. For games with strategic complementarities, the geometry of the best-response correspondence helps identify the LRE. Journal of Economic Literature Classification Numbers: C63, C72, D43.