In and out of equilibrium II: evolution in repeated games with discounting and complexity costs

Matthijs van Veelen, Julián García

Research output: Contribution to journalArticleResearchpeer-review

Abstract

We explore evolutionary dynamics for repeated games with small, but positive complexity costs. We begin by extending a folk theorem result by Cooper (1996) to continuation probabilities, or discount rates, smaller than 1. Then we show that All D has a uniform invasion barrier. Since none of the more cooperative equilibria are robust against indirect invasions, we might expect not to observe any cooperative equilibria when complexity costs are positive. The average level of cooperation in the dynamics, however, can hover anywhere between no cooperation at all, and the average level of cooperation in the absence of complexity costs, depending on how small complexity costs are and how large the population is.

Original languageEnglish
Pages (from-to)113-130
Number of pages18
JournalGames and Economic Behavior
Volume115
DOIs
Publication statusPublished - May 2019

Keywords

  • Complexity costs
  • Neutrally stable strategy
  • Repeated games
  • Robust against indirect invasions
  • Uniform invasion barrier
  • Wright-Fisher process

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