Imitation and the Evolution of Walrasian Behavior: Theoretically Fragile but Behaviorally Robust

19 Pages Posted: 19 Feb 2008

See all articles by Jose Apesteguia

Jose Apesteguia

Universitat Pompeu Fabra - Department of Economics and Business (DEB)

Steffen Huck

University College London - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Joerg Oechssler

University of Heidelberg - Alfred Weber Institute for Economics

Simon Weidenolzer

affiliation not provided to SSRN

Date Written: February 2008

Abstract

A well-known result by Vega-Redondo (1997) implies that in symmetric Cournot oligopoly, imitation leads to the Walrasian outcome where price equals marginal cost. In this paper, we show that this result is not robust to the slightest asymmetry in fixed costs. Instead of obtaining the Walrasian outcome as unique prediction, every outcome where agents choose identical actions will be played some fraction of the time in the long run. We then conduct experiments to check this fragility. We obtain that, contrary to the theoretical prediction, the Walrasian outcome is still a good predictor of behavior.

Keywords: evolutionary game theory, stochastic stability, imitation, Cournot markets, information, experiments, simulations

JEL Classification: C72, C91, C92, D43, L13

Suggested Citation

Apesteguia, Jose and Huck, Steffen and Oechssler, Joerg and Weidenolzer, Simon, Imitation and the Evolution of Walrasian Behavior: Theoretically Fragile but Behaviorally Robust (February 2008). CESifo Working Paper Series No. 2224. Available at SSRN: https://ssrn.com/abstract=1095135

Jose Apesteguia

Universitat Pompeu Fabra - Department of Economics and Business (DEB) ( email )

Barcelona, 08005
Spain

HOME PAGE: http://www.econ.upf.es/~apesteguia/

Steffen Huck (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom
+44 207 679 5895 (Phone)
+44 207 916 2774 (Fax)

HOME PAGE: http://www.ucl.ac.uk/~uctpshu/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Joerg Oechssler

University of Heidelberg - Alfred Weber Institute for Economics ( email )

Grabengasse 14
Heidelberg, D-69117
Germany
+49 6221 54 3548 (Phone)
+49 6221 54 3630 (Fax)

HOME PAGE: http://www.awi.uni-heidelberg.de/with2/theorie2/Team/Oechssler/Oechssler_main.html

Simon Weidenolzer

affiliation not provided to SSRN ( email )

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