Theoretical Economics, Volume 8, Number 1 (January 2013)

Theoretical Economics 8 (2013), 165–192


Refined best-response correspondence and dynamics

Dieter Balkenborg, Josef Hofbauer, Christoph Kuzmics

Abstract


We call a correspondence, defined on the set of mixed strategy pro les, a generalized best reply correspondence if it (1) has a product structure, (2) is upper hemi-continuous, (3) always includes a best reply to any mixed strategy pro le, and (4) is convex- and closed-valued. For each generalized best reply correspondence, we defi ne a generalized best reply dynamics as a differential inclusion based on it. We call a face of the set of mixed strategy profi les a minimally asymptotically stable face (MASF) if it is asymptotically stable under some such dynamics and no subface of it is asymptotically stable under any such dynamics. The set of such correspondences (and dynamics) is endowed with the partial order of point-wise set inclusion and, under a mild condition on the normal form of the game at hand, forms a complete lattice with meets based on point-wise intersections. The refined best reply correspondence is then defined as the smallest element of the set of all generalized best reply correspondences. We find that every persistent retract (Kalai and Samet 1984) contains an MASF. Furthermore, persistent retracts are minimal CURB sets (Basu and Weibull 1991) based on the refi ned best reply correspondence. Conversely, every MASF must be a prep set (Voorneveld 2004), based again, however, on the refined best reply correspondence.

Keywords: Evolutionary game theory, best response dynamics, CURB sets, persistent retracts, asymptotic stability, Nash equilibrium refinements, learning

JEL classification: C62, C72, C73

Full Text:  PRINT  VIEW