Monotone Methods for Equilibrium Selection under Perfect Foresight Dynamics

Oyama, Daisuke and Takahashi, Satoru and Hofbauer, Josef (2003): Monotone Methods for Equilibrium Selection under Perfect Foresight Dynamics.

Abstract

This paper studies a dynamic adjustment process in a large society of forward-looking agents where payoffs are given by a normal form supermodular game. The stationary states of the dynamics correspond to the Nash equilibria of the stage game. It is shown that if the stage game has a monotone potential maximizer, then the corresponding stationary state is uniquely linearly absorbing and globally accessible for any small degree of friction. Among binary supermodular games, a simple example of a unanimity game with three players is provided where there are multiple globally accessible states for a small friction.

• Item Type: MPRA Paper
• Language: English
• Keywords: equilibrium selection; perfect foresight dynamics; supermodular game; strategic complementarity; stochastic dominance; potential; monotone potential
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C73 - Stochastic and Dynamic Games ; Evolutionary Games ; Repeated Games

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