Local Conventions

Jeffrey C. Ely*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

50 Scopus citations

Abstract

It is shown that player mobility has important consequences for the long-run equilibrium distribution in dynamic evolutionary models of strategy adjustment, when updating is prone to small probability perturbations, i.e. "mistakes or "mutations. Ellison (1993) concluded that the effect on the matching process of localized "neighborhoods was to strengthen the stability of risk-dominant outcomes, originally demonstrated by Kandori, Mailath, and Rob (1993) (KMR) and Young (1993). I consider a model in which players can choose the neighborhoods to which they belong. When strategies and locations are updated simultaneously, only efficient strategies survive. The robustness of this conclusion is emphasized in a general locational model in which strategy revision opportunities are allowed to arrive at a faster rate than opportunities to change locations. The efficient strategy persists in all cases in which the locational structure is non-trivial. Moreover, even as the relative frequency of player mobility approaches zero, the efficient strategy occurs with boundedly positive relative frequency. This result is in stark contrast to the conclusions of the previous models.

Original languageEnglish (US)
Article number1
JournalB.E. Journal of Theoretical Economics
Volume2
Issue number1
DOIs
StatePublished - 2002

Keywords

  • local interaction
  • mobility
  • stochastic evolution

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)

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