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The evolution of conventions under incomplete information
Jacobsen, Hans Jorgen; Jensen, Mogens; Sloth, Birgitte
Universitat Pompeu Fabra. Departament d'Economia i Empresa
We formulate an evolutionary learning process in the spirit ofYoung (1993a) for games of incomplete information. The process involves trembles. For many games, if the amount of trembling is small, play will be in accordance with the games' (semi-strict) Bayesian equilibria most of the time. This supports the notion of Bayesian equilibrium. Further, often play will most of the time be in accordance with exactly one Bayesian equilibrium. This gives a selection among the Bayesian equilibria. For two specific games of economic interest wecharacterize this selection. The first is an extension to incomplete information of the prototype strategic conflict known as Chicken. The second is an incomplete information bilateral monopoly, which is also an extension to incompleteinformation of Nash's demand game, or a simple version ofthe so-called sealed bid double auction. For both gamesselection by evolutionary learning is in favor of Bayesianequilibria where some types of players fail to coordinate, such that the outcome is inefficient.
games of incomplete information
bayesian equilibrium
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