Stochastic Imitation in Finite Games

SSE/EFI Economics and Finance Working Paper Series No. 363

30 Pages Posted: 8 May 2003

See all articles by Jens Josephson

Jens Josephson

Stockholm University; Research Institute of Industrial Economics (IFN)

Alexander Matros

Moore School of Business

Date Written: November 2002

Abstract

In this paper we model an evolutionary process with perpetual random shocks, where individuals sample population-specific strategy and payoff realizations and imitate the most successful behavior. For finite n-player games we prove that in the limit, as the perturbations tend to zero, only strategy-tuples in minimal sets closed under single better replies will be played with positive probability. If the strategy-tuples in one such minimal set have strictly higher payoffs than all outside strategy-tuples, then the strategy-tuples in this set will be played with probability one in the limit, provided the minimal set is a product set and the sample is sufficiently large.

Keywords: evolutionary game theory, bounded rationality, imitation, Markov chain, stochastic stability, Pareto dominance

JEL Classification: C72, C73

Suggested Citation

Josephson, Jens and Matros, Alexander, Stochastic Imitation in Finite Games (November 2002). SSE/EFI Economics and Finance Working Paper Series No. 363, Available at SSRN: https://ssrn.com/abstract=385104 or http://dx.doi.org/10.2139/ssrn.385104

Jens Josephson (Contact Author)

Stockholm University ( email )

Sweden

Research Institute of Industrial Economics (IFN) ( email )

Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden

Alexander Matros

Moore School of Business ( email )

1014 Greene St
Columbia, SC 29208
United States

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