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http://hdl.handle.net/10419/59475
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| Title: | | Log-linear dynamics and local potential  |
| Authors: | | Okada, Daijiro Tercieux, Olivier |
| Issue Date: | | 2008 |
| Series/Report no.: | | Working Papers, Department of Economics, Rutgers, the State University of New Jersey 2008,07 |
| Abstract: | | We show that local potential maximizer ([15]) with constant weights is stochastically stable in the log-linear dynamics provided that the payoff function or the associated local potential function is supermodular. We illustrate and discuss, through a series of examples, the use of our main results as well as other concepts closely related to local potential maximizer: weighted potential maximizer, p-dominance. We also discuss the log-linear processes where each player's stochastic choice rule converges to the best response rule at different rates. For 2 x 2 games, we examine a modified log-linear dynamics (relative log-linear dynamics) under which local potential maximizer with strictly positive weights is stochastically stable. This in particular implies that for 2 x 2 games a strict (p1,p2)-dominant equilibrium with p1+p2<1 is stochastically stable under the new dynamics. |
| Subjects: | | log-linear dynamics stochastic stability local potential maximizer equilibrium selection comparison of Markov chains |
| JEL: | | C72 C73 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Working Papers, Department of Economics, Rutgers University
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