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A myopic adjustment process leading to best-reply matching


Kosfeld, M; Droste, E; Voorneveld, M (2002). A myopic adjustment process leading to best-reply matching. Games and Economic Behavior, 40(2):270-290.

Abstract

We analyze a myopic strategy adjustment process in strategic-form games. It is shown that the steady states of the continuous time limit, which is constructed assuming frequent play and slow adjustment of strategies, are exactly the best-reply matching equilibria, as discussed by Droste, Kosfeld, and Voorneveld (2000. Mimeo, Tilburg University). In a best-reply matching equilibrium every player ‘matches’ the probability of playing a pure strategy to the probability that this pure strategy is a best reply to the pure-strategy profile played by his opponents. We derive stability results for the steady states of the continuous time limit in 2×2 bimatrix games and coordination games. Analyzing the asymptotic behavior of the stochastic adjustment process in discrete time shows convergence to minimal curb sets of the game. Moreover, absorbing states of the process correspond to best-reply matching equilibria of the game.

Abstract

We analyze a myopic strategy adjustment process in strategic-form games. It is shown that the steady states of the continuous time limit, which is constructed assuming frequent play and slow adjustment of strategies, are exactly the best-reply matching equilibria, as discussed by Droste, Kosfeld, and Voorneveld (2000. Mimeo, Tilburg University). In a best-reply matching equilibrium every player ‘matches’ the probability of playing a pure strategy to the probability that this pure strategy is a best reply to the pure-strategy profile played by his opponents. We derive stability results for the steady states of the continuous time limit in 2×2 bimatrix games and coordination games. Analyzing the asymptotic behavior of the stochastic adjustment process in discrete time shows convergence to minimal curb sets of the game. Moreover, absorbing states of the process correspond to best-reply matching equilibria of the game.

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Additional indexing

Item Type:Journal Article, refereed
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Uncontrolled Keywords:Myopic Adjustment, Learning, Matching, Best-reply
Language:English
Date:August 2002
Deposited On:11 Feb 2008 12:29
Last Modified:05 Apr 2016 12:22
Publisher:Elsevier
ISSN:0899-8256
Publisher DOI:https://doi.org/10.1016/S0899-8256(02)00007-6

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