Selection dynamics, asymptotic stability, and adaptive behav

Selection dynamics are often used to distinguish stable and unstable equilibria. This is particularly useful when multiple equilibria prevent a priori comparative static analysis. An experiment designed to compare the accuracy of the myopic best-response dynamic and an inertial selection dynamic is...

Full description

Saved in:
Bibliographic Details
Published in:The Journal of political economy 1994-10, Vol.102 (5), p.975
Main Authors: Van Huyck, John B, Cook, Joseph P, Battalio, Raymond C
Format: Article
Language:English
Subjects:
Economic models
Economic theory
Experiments
Political economy
Studies
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Selection dynamics are often used to distinguish stable and unstable equilibria. This is particularly useful when multiple equilibria prevent a priori comparative static analysis. An experiment designed to compare the accuracy of the myopic best-response dynamic and an inertial selection dynamic is presented. The inertial selection dynamic correctly predicts the behavior observed in the experiment. The myopic best-response dynamic does not. Given the results, the accurate selection theory must characterize the interior equilibrium as a stable fixed point of the selection dynamic. Observed behavior is inertial, and an accurate selection dynamic must reflect this inertia. The experiment does not contradict the traditional view of stability analysis. Behavior in the experiment always converged to the unique stable fixed point of the inertial selection dynamic.
ISSN:0022-3808
1537-534X