evolutionary stability in games of communication abstract this paper identifies evolutionarily stable outcomes in games in which one player has private information and the other takes a payoff relevant action the informed player can communicate at little cost outcomes satisfying a set valued evolutionary stability condition must exist and be efficient in common interest games when there is a small cost associated with using each message the outcome preferred by the informed player is stable the paper introduces a nonequilibrium set valued stability notion of entry resistant sets for games with partial common interest the no communication outcome is never an element of an entry resistant set journal of economic literature classification numbers c72 d82

dynamic processes of social and economic interactions on the persistence of inefficiencies an economy with a finite number of agents and a finite number of states is considered an exogenous institutional rule prescribes which moves from one state to another are feasible to each coalition at each time an agent is called to act with some exogenous probability and he chooses a coalition a feasible new state to move the economy to and side payments between the agents in the coalition the setup can be applied to various dynamic processes of social and economic interactions such as legislative bargaining coalition formation or exchange economies whenever agents are unable to write long term contracts but are otherwise unconstrained both in their ability to write arbitrary spot contracts and in their ability to collude there can be long run inefficiencies with cycles or inefficient steady states however when agents are sufficiently patient the initial state from which the process starts plays no role in the long run moreover when there exists an efficient state that is free of negat

adjustment dynamics and rational play in games when a given strategic situation arises repeatedly the possibility arises that equilibrium predictions can be justified by a dynamic adjustment process we examine myopic adjustment dynamics a class that includes replicator dynamics from evolutionary game theory simple models of imitation models of experimentation and adjustment and some simple learning dynamics we present a series of theorems showing conditions under which behavior that is asymptotically stable under some such dynamic is strategically stable in the sense of kohlberg and mertens this behavior is thus as if the agents in the economy satisfied the extremely stringent assumptions that game theory traditionally makes about rationality and beliefs journal of economic literature classification number c72

the dynamic in stability of backwards induction abstract the evolutionary basis for predicting the backwards induction solution in finite extensive form games with perfect information is examined evolution is modelled using the replicator dynamic in combination with rare perturbations that introduce a small change in the proportion of each strategy the criterion for our judgement is whether this dynamic stabilizes over time at the subgame perfect equilibrium outcome we find that the backwards induction solution is fully justified by this process only in very simple games examples of more complex games are given in which this process does not select between the subgame perfect equilibrium outcome and alternative nash equilibrium outcomes journal of economic literature classification numbers c72 c79

dynamic coalition formation and the core this paper presents a dynamic model of endogenous coalition formation in cooperative games with transferable utility tu the players are boundedly rational at each time step a player decides which of the existing coalitions to join and demands a payoff these decisions are determined by a best reply rule given the coalition structure and allocation in the previous period further the players experiment with myopically suboptimal strategies whenever there are potential gains from trade we establish an isomorphism between the set of absorbing states of the process and the set of core allocations and show that the process converges to one of these states with probability one whenever the core is non empty these results do not require superadditivity of the characteristic function and they carry over to the case of coalitional values depending on the coalition structure and to non transferable utility ntu games

farsighted coalitional stability abstract i define the largest consistent set a solution concept which applies to situations in which coalitions freely form but cannot make binding contracts act publicly and are fully farsighted in that a coalition considers the possibility that once it acts another coalition might react a third coalition might in turn react and so on without limit i establish weak nonemptiness conditions and apply it to strategic and coalitional form games and majority rule voting i argue that it improves on the von neumann morgenstern stable set as it is usually defined but is consistent with a generalization of the stable set as in the theory of social situations journal of economic literature classification numbers c70 c71

the design of improved parimutuel type information aggregation mechanisms inaccuracies and the long shot bias as disequilibrium phenomena information aggregation mechanisms iams based on parimutuel type betting systems can aggregate information from complex environments however the performance of previously studied systems is imperfect due to possible bluffing strategic timing of decisions and long shot bias this paper demonstrates two modifications of parimutuel systems that improve information aggregation performance by removing disinformation due to strategic behavior and by removing misleading disequilibrium behavior these experiments also demonstrate that long shot bias results from disequilibrium behavior as opposed to being inherent in the psychology of the individuals

an evolutionary model of bargaining abstract individuals from two populations of bargainers are randomly matched to play the nash demand game they make their demands by choosing best replies based on an incomplete knowledge of the precedents and occasionally they choose randomly there is no common knowledge over the long run typically one division will be observed almost all of the time this stochastically stable division is close to the nash solution when all agents in the same population are alike when the populations are heterogeneous a generalization of the nash solution results if there is some mixing between the two populations the stable division is fifty fifty journal of economic literature classification number c78

rational expectations and the aggregation of diverse information in laboratory security markets the idea that markets might aggregate and disseminate information and also resolve conflicts is central to the literature on decentralization hurwicz 1972 and rational expectations lucas 1972 we report on three series of experiments all of which were predicted to have performed identically by the theory of rational expectations in two of the three series one in which participants trade a complete set of arrow debreu securities and a second in which all participants have identical preferences double auction trading leads to efficient aggregation of diverse information and rational expectations equilibrium failure of the third series to exhibit such convergence demonstrates the importance of market institutions and trading instruments in achievement of equilibrium

a prospect theory nash bargaining solution and its stochastic stability abstract we consider the long run outcomes of bargaining games when players obey prospect theory we extend the evolutionary bargaining model of young 1993 to a two stage nash demand game two players simultaneously choose whether to exercise an outside option in the first stage and play the nash demand game in the second stage which will be reached only if neither player exercises the outside option we address the influence on the stochastically stable division of reference dependent preferences where the reference point is the value of the outside option we show that the division consistently differs from the nash bargaining solution under expected utility theory inspired by this we propose a prospect theory nash bargaining solution which coincides with the stochastically stable division

a formalization and test of the religious economies model the religious economies argument maintains that religious pluralism promotes religious participation although this theory has been much debated by sociologists of religion evaluation has been hindered by the lack of a formal model this paper offers a formalization that builds on the product differentiation framework from industrial organization economics the model suggests a new measure of religious competition and a new empirical test one religious market may be regarded as more competitive than another religious market if the set of denominations present in the first contains the set of denominations present in the second given this partial order on the set of religious markets the model predicts that more competitive markets will have higher religious participation this prediction is examined for two data sets previously considered in the literature new york towns in 1865 and u s counties in 1990 although the analysis highlights an important theoretical ambiguity regarding the strategic interdependence of denominational effort choices and reports a negative empirical finding that more competitive u s counties tend to have lower religious participation the paper proceeds constructively attempting to identify viable directions for future research within the religious economies paradigm

stochastic stability under logit choice in coalitional bargaining problems abstract this study examines a dynamic process of n person coalitional bargaining problems we investigate the evolution of social conventions by embedding a coalitional bargaining setting in a dynamic process in each period a group of players may make some coalitional move that is forming a new team or negotiating the division of a surplus players revise their coalitions and surplus divisions over time in the presence of stochastic noise which leads players to make a suboptimal decision under a logit specification of choice probabilities we find that the stability of a core allocation decreases in the wealth of the richest player furthermore stochastically stable allocations are core allocations that minimize the wealth of the richest player

equilibrium selection with coupled populations in hawk dove games theory and experiment in continuous time abstract standard one and two population models for evolutionary games are the limit cases of a uniparametric family combining intra and intergroup interactions our setup interpolates between both extremes with a coupling parameter for the example of the hawk dove game we analyze the replicator dynamics of the coupled model we confirm the existence of a bifurcation in the dynamics of the system and identify three regions for equilibrium selection one of which does not appear in common one and two population models we also design a continuous time experiment exploring the dynamics and the equilibrium selection the data largely confirm the theory

do people play nash equilibrium lessons from evolutionary game theory evolutionary game theory provides an answer to two of the central questions in economic modeling when is it reasonable to assume that people are rational and when is it reasonable to assume that behavior is part of a nash equilibrium and if it is reasonable which equilibrium the traditional answers are not compelling and much of evolutionary modeling is motivated by the need for a better answer evolutionary game theory suggests that in a range of settings agents do eventually play a nash equilibrium moreover evolutionary modeling has shed light on the relative plausibility of different nash equilibria

rationalizable strategic behavior the notion of equilibrium proposed by nash 19 has come to play a dominant role in economic applications of noncooperative games while analyses of nash equilibria have unquestionably contributed to our understanding of economic behavior it would be unreasonably optimistic to maintain that nash solved the problem of noncooperative strategic choice there is a small literature beginning with ellsberg 6 and a much larger oral tradition which argues that nash behavior is neither a necessary consequence of rationality nor a reasonable empirical proposition in this paper i take the view that although there may be various reasons why an agent might select a nash strategy the notion of an equilibrium has little intrinsic appeal within a strategic context when an agent reaches a decision in ignorance of the strategies adopted by other players rationality consists of making a choice which is justifiable by an internally consistent system of beliefs rather than one which is optimal post hoc this point of view is not original indeed most serious justifications of the nash hypothesis embrace such an approach arguing that agents will expect the game to yield a nash outcome and consequently will choose their equilibrium strategies nevertheless when we think in terms of maximizing utility subject to expectations rather than realizations it becomes clear that the nash hypothesis far from being a consequence of rationality arises from certain restrictions on agents expectations which may or may not be plausible depending upon the game being played we are then quite naturally led to ask are there any restrictions of individuals expectations and hence choices which are required by rationality alone rather than by subjective plausibility this paper is concerned with defining justifying characterizing and refining a criterion for rational strategic choice which i label rationalizability

evolution of beliefs and the nash equilibrium of normal form games abstract the paper formulates a simple two person model of learning with pattern recognition and discusses its implications in particular it focuses on the asymptotic behavior of players beliefs when the game has a mixed strategy nash equilibrium journal of economics literatureclassification numbers c72 d83

clever agents in young s evolutionary bargaining model in the models of young 1993 econometrica61 57 84 1993 j econ theory59 145 168 boundedly rational individuals are recurrently matched to play a game and they play myopic best replies to the recent history of play it could therefore be an advantage to instead play a myopic best reply to the myopic best reply something boundedly rational players might conceivably also do we investigate this possibility in the context of young s j econ theory59 145 168 bargaining model it turns out that cleverness in this respect indeed does have an advantage in some cases however if all individuals are equally informed about past play in a statistical sense then the nash bargaining solution remains the unique long run outcome when the mutation rate goes to zero journal of economic literature classification numbers c70 c78

rationalizable strategic behavior and the problem of perfection this paper explores the fundamental problem of what can be inferred about the outcome of a noncooperative game from the rationality of the players and from the information they possess the answer is summarized in a solution concept called rationalizability strategy profiles that are rationalizable are not always nash equilibria conversely the information in an extensive form game often allows certain unreasonable nash equilibria to be excluded from the set of rationalizable profiles a stronger form of rationalizability is appropriate if players are known to be not merely rational but also cautious what constitutes rational behavior in a noncooperative strategic situation this paper explores the issue in the context of a wide class of finite noncooperative games in extensive form the traditional answer relies heavily upon the idea of nash equilibrium nash 17 the position developed here however is that as a criterion for judging a profile of strategies to be reasonable choices for players in a game the nash equilibrium property is neither necessary nor sufficient some nash equilibria are intuitively unreasonable and not all reasonable strategy profiles are nash equilibria the fact that a nash equilibrium can be intuitively unattractive is well known the equilibrium may be imperfect introduced into the literature by selten 20 the idea of imperfect equilibria has prompted game theorists to search for a narrower definition of equilibrium while this research some of which will be discussed here has been extremely instructive it remains inconclusive theorists often agree about what should happen in particular games but to capture this intuition in a general solution concept has proved to be very difficult if this paper is successful it should make some progress in that direction the other side of the coin has received less scrutiny can all non nash profiles really be excluded on logical grounds i believe not the standard justifications for considering only nash profiles are circular in nature or make gratuitous assumptions about players decision criteria or beliefs the following discussion of these points is extremely brief due to space constraints more detailed arguments may be found in pearce 18

rawlsian justice as the core of a game it is suggested that the ethical notion of social contract can be formally modeled using the well studied concept of the core of a game this provides a mathematical technique for studying social contracts and theories of justice the idea is applied to rawlsian justice here this abstract was borrowed from another version of this item

adaptive play in multiplayer bargaining situations we study the dual issues of allocation and coalition formation in a model of social learning for a class of economies which can be expressed in terms of a real valued characteristic function we first show that all self perpetuating allocations realized from a simple bargaining game must be core allocations although players make simultaneous demands for surplus and only on their own behalf following this we provide a sufficient condition under which the society eventually learns to divide the surplus according to some core allocation regardless of the initial history

cycles of learning in the centipede game abstract this paper studies the evolutionary properties of the centipede game for this game the use of backward induction as a model of rational behavior has been consistently challenged by the experimental evidence our claim is that backward induction can still accurately predict the players behavior provided that they are given time enough to appreciate the strategic environment in which they operate we support this claim by proving convergence to the backward induction solution for all continuous time monotonic selection dynamics however we also show that this solution is intrinsically unstable and how this instability is positively related to the length of the game journal of economic literature classification numbers c72 c79

coalition formation as a dynamic process abstract we study coalition formation as an ongoing dynamic process with payoffs generated as coalitions form disintegrate or regroup a process of coalition formation pcf is an equilibrium if a coalitional move to some other state can be justified by the expectation of higher future value compared to inaction this future value in turn is endogenous it depends on coalitional movements at each node we study existence of equilibrium pcfs we connect deterministic equilibrium pcfs with unique absorbing state to the core and equilibrium pcfs with multiple absorbing states to the largest consistent set in addition we study cyclical as well as stochastic equilibrium pcfs

a theory of anticipated utility abstract a new theory of cardinal utility with an associated set of axioms is presented it is a generalization of the von neumann morgenstern expected utility theory which permits the analysis of phenomena associated with the distortion of subjective probability

evolution of preferences we endogenize preferences using the indirect evolutionary approach individuals are randomly matched to play a two person game individual subjective preferences determine their behaviour and may differ from the actual objective pay offs that determine fitness matched individuals may observe the opponents preferences perfectly not at all or with some in between probability when preferences are observable a stable outcome must be efficient when they are not observable a stable outcome must be a nash equilibrium and all strict equilibria are stable we show that for pure strategy outcomes these conclusions are robust to allowing almost perfect and almost no observability with the notable exception that inefficient strict equilibria may fail to be stable with any arbitrarily small degree of observability despite being stable with no observability

conflict on the commons natural resource entitlements the public interest and agricultural economics i began this odyssey toward a presidential address reflecting on certain problems i see out there in the real world what they mean and what lessons they suggest for us as ag economists that is the strength of our discipline and profession an anchor in real events it is more useful to start with problems and seek order with economics than to start with a principle or method and shop for a problem there are battles being waged in the u s countryside that speak volumes for us as applied social scientists it has to do with private discretion the right of individuals with access to natural resources to do what they want when they want whatever the impacts on others it has to do with power entitlement economic and social change interdependence vision for the future sense of the commons in private action some farm leaders have been saying very intemperate things lately about property rights and alleged government takeovers as is usually the case in the political economics of who may do what to whom verbal symbols encase larger ideas and become the proxies in battle terms and phrases like independence freedom the public interest my god given right the farming way of life the rural myth market distortions greedy landowners and rabid environmentalists dominate the debate there is disarray in rural institutions rules that create rights and obligations in use of natural resources are simply out of step with general economic and social changes underway in rural america i have also had concerns about us ag economists particularly research and education types in land grant universities and government we seem less open adaptable and expansive than we were even ten years ago we were pushing the boundaries of our discipline and problem set now there are pressures to go back to basics perhaps it is the economic crisis in academia with fewer jobs shrinking departments no raises little wonder we are skittish then it dawned on me we are behaving exactly like farmers and other property owners we are building fences trying to scare off the bureaucrats declaring our rights fighting to preserve disciplinary purity this paper is about property rights the public interest and our particular piece of agricultural economics real estate in the path of economic and social change i will examine selected natural resource institutional issues for insight about our discipline and profession the parallels lead to certain recommendations essential

endogenous formation of coalitions the formation of coalitions is a fundamental problem in game theory by a coalition is meant a group of players e g economic or political agents which decide to act together as one unit relative to the rest of the players this includes the instances of syndicates unions cartels blocks political parties parliamentary coalitions etc we would like to emphasize that forming a coalition does not eliminate the individual players as decision makers in all interactions with the other players coalition members act as one unit it may be useful to think of a representative agent taking their place 2 however this arrangement will continue only as long as each player finds it desirable to act this way further bargaining occurs among the members of each coalition on how to divide what they obtained together thus the existence of coalitions implies that the interactions among the players will be conducted on two levels first among the coalitions and second within each coalition most of the existing models in economics and game theory assume that the coalition structure is given exogenously instead we try here to obtain it as an endogenous outcome of our model namely we want to be able to predict which coalitions will in fact form in each given situation 3 our theory combines two kinds of game theoretic concepts value and stability the basic idea is first to evaluate the players prospects in the various coalition structures and then based on these values to find which ones are stable we will call this value coalition structure value or cs value for short the reason we are considering coalition structures i e partitions of the set of players into disjoint coalitions rather than just coalitions is that in general players may find it to their advantage to join forces in some situations and to act separately in others all depending on the way the other participants are organized this implies that both the value and the stability concepts should depend on the entire coalition structure the cs value we analyze in this paper was first developed by owen 7

conflict leads to cooperation in demand bargaining abstract we consider a multilateral nash demand game in which short sighted players come to the bargaining table with requests for both coalition partners and the potentially generated resource we prove that the resulting process converges with probability one to a state in which all players agree on a strictly self enforcing division of resources i e a strict core allocation highlighting group dynamics we show how the myopic actions of players may lead to the break up of groups in the short run but can ultimately bring about a situation from which a strictly self enforcing allocation can be reached

social stability and equilibrium in the field of noncooperative game theory nash equilibrium nash 1951 has played a central role as a solution concept in bold strokes one may discern two major interpretations of nash equilibrium in the context of rational players the first which is close to the eductive interpretation of binmore 1987 1988 and the complete information interpretation of kaneko 1987 assumes that the game is played exactly once if it is a repeated game the repetition occurs once and the players have sufficient knowledge and ability to analyze the game in a rational manner sometimes it is assumed that all players have consistent hierarchies of beliefs where the game and their priors are common knowledge bayesian interpretation such as proposed by aumann 1987 advanced this idea to the level that the players have a common prior from this point of view however nash equilibrium seems far from being satisfactory

evolutionary stability with equilibrium entrants abstract the strategy that upsets a potential evolutionarily stable strategy may in itself be very unstable or may differ from the candidate strategy only in irrelevant ways this paper develops a solution concept addressing these difficulties we lood for a set of nash equilibria such that small groups of entrants whose members are satisfied with their entry cannot take the population out of the set such a set is robust to the iterated removal of weakly dominated strategies depends only on the reduced normal form and has the never a weak best response property for generic two person extensive form games such sets generate payoffs consistent with proper equilibria

efficiency of experimental security markets with insider information an application of rational expectations models the study reports on the ability of competing models of market information integration and dissemination to explain the behavior of simple laboratory markets for a one priced security returns to the security depended upon a randomly drawn state of nature some agents insiders whose identity was unknown to other agents knew the state before the markets opened with replication of market conditions the predictions of a fully revealing rational expectations model are relatively accurate prices adjusted immediately to near rational expectations prices profits of insiders were virtually indistinguishable from non insiders and efficiency levels converged to near 100 percent

an evolutionary approach to pre play communication we add a round of pre play communication to a finite two player game played by a population of players pre play communication is cheap talk in the sense that it does not directly enter the payoffs the paper characterizes the set of strategies that are stable with respect to a stochastic dynamic adaptive process periodically players have an opportunity to change their strategy with a strategy that is more successful against the current population any strategy that weakly improves upon the current poorest performer in the population enters with positive probability when there is no conflict of interest between the players only the efficient outcome is stable with respect to these dynamics for general games the set of stable payoffs is typically large every efficient payoff recurs infinitely often

evolutionary dynamics with aggregate shocks abstract we study the evolution of the continuous time replicator dynamics when payoffs are subject to aggregate shocks that take the form of a wiener process in the absence of mutation the system need not have an ergodic distribution with mutation the system does have an ergodic distribution in the limit as the mutation rate and the variance of the shocks converge to zero this distribution concentrates on the risk dominant equilibrium this result is not however robust to changes in the underlying deterministic dynamics

cheap talk coordination and evolutionary stability abstract asymmetric information games where the informed player can send a costless message sender receiver games typically have equilibria where meaningful communication occurs we therefore know such cheap talk can matter still even when there is no conflict of interest there are also equilibria where no information transmission occurs this paper shows that for a class of games with perfectly coinciding interests modeled as asymmetric contests where players are unsure of which role they will have only meaningful communication is evolutionarily stable journal of economic literature classification numbers c70 c72 d82

a noncooperative theory of coalitional bargaining the authors explore a sequential offers model of n person coalitional bargaining with transferable utility and with time discounting their focus is on the efficiency properties of stationary equilibria of strictly superadditive games when the discount factor delta is sufficiently large it is shown that delay and the formation of inefficient subcoalitions can occur in equilibrium the latter for some or all orders of proposer however efficient stationary equilibrium payoffs converge to a point in the core as delta approaches one strict convexity is a sufficient condition for there to exist an efficient stationary equilibrium payoff vector for sufficiently high delta

a noncooperative view of coalition formation and the core a noncooperative implementation of the core is provided for games with transferable utility the implementation obtained here is meant to reflect the standard motivation for the core as closely as possible in the model proposed time is continuous this idealized treatment of time is most amenable for capturing an essential feature of the core there is always time to reject a noncore proposal before it is consumated

information aggregation in a large multi stage market game abstract a three stage market game mechanism is devised that is simple actions are quantities and outcomes are determined by arithmetic operations that do not depend on details of the economy and achieves efficiency in a two divisible good pure exchange setting with potential information aggregation after an entry stage agents make offers which are provisional for all but a small randomly selected group then those offers are announced and everyone else makes new offers with payoffs determined by a shapley shubik market game for a finite and large number of players there exists an almost ex post efficient equilibrium conditions for uniqueness are also provided

equilibrium selection in a nonlinear duopoly game with adaptive expectations abstract we analyze a nonlinear discrete time cournot duopoly game where players have adaptive expectations the evolution of expected outputs over time is generated by the iteration of a noninvertible two dimensional map the long run behavior is characterized by multistability that is the presence of coexisting stable consistent beliefs which correspond to nash equilibria in the quantity space hence a problem of equilibrium selection arises and the long run outcome strongly depends on the choice of the players initial beliefs we analyze the basins of attraction and their qualitative changes as the model parameters vary we illustrate that the basins might be nonconnected sets and reveal the mechanism which is responsible for this often neglected kind of complexity the analysis of the global bifurcations which cause qualitative changes in the topological structure of the basins is carried out by the method of critical curves

efficient equilibrium selection in evolutionary games with random matching abstract this paper investigates the sensitivity of recent evolutionary models of learning to the specification of the matching mechanism we study a literally random matching mechanism combined with a process of strategy adjustment based on the realized average performance of each strategy in the key class of symmetric 2 2 coordination games the pareto efficient equilibrium per se is selected rather than the risk dominant equilibrium as the probability of experimentation or mutation goes to zero furthermore convergence to the equilibrium is relatively fast we extend these results for example to games of common interest journal of economic literature classification numbers c72 c73

markets as information gathering tools the academic literature wall street commentary and even daily news reporting reflect a belief that markets can anticipate events the current movements in the stock market are interpreted as reflecting the likelihood that the federal reserve system will change interest rates futures markets are interpreted as reflecting the best estimates of things to come movements in individual stock prices are thought to anticipate earnings reports or the probability of a merger or buyout if we want to know about future weather in the south we should study the orange juice futures the academic journals are filled with the concept of rational expectations in which current prices are supposed to reflect the sum of all knowledge in the system prices according to this theory are a statistic that indicates the aggregation of information about underlying states of the economy those who are outsiders to the information in the system become insiders by simply observing the economic activity