Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2001-04-04
Number: 01-041/1
Author-Name: Harold Houba
Author-Email: hhouba@feweb.vu.nl
Author-Workplace-Name: Vrije Universiteit Amsterdam
Author-Name: Alexander F. Tieman
Author-Email: a.f.tieman@dnb.nl
Author-Workplace-Name: Vrije Universiteit Amsterdam, and De Nederlandsche Bank
Title: Idiosyncratic and Aggregate Time-Varying Mutation Rates in Coordination Games
Abstract: We extend the standard evolutionary model of Kandori, Mailath, andRob (1993) to incorporate time-varying aggregate and idiosyncraticshocks separately in coordination games.We show that both types of shocks have a different effect on theinvariant distribution over the different equilibria of dthe game.While idiosyncratic shocks are shown to be neutral, the aggregateshocks introduce a systematic bias against the risk dominantequilibrium.Different from Kandori, Mailath, and Rob (1993) we derive a sufficient conditionunder which this bias prevents equilibrium selection with probability one.
File-Url: https://papers.tinbergen.nl/01041.pdf
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Handle: RePEc:tin:wpaper:20010041