The evolution of mixed conjectures in the rent-extraction game

Brito, Paulo, Datta, Bipasa and Dixon, Huw ORCID: https://orcid.org/0000-0002-9875-8965 2012. The evolution of mixed conjectures in the rent-extraction game. [Working Paper]. Cardiff Economics Working Papers, Cardiff: Cardiff University.

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Abstract

This paper adopts an evolutionary perspective on the rent-extraction model with conjectural variations (CV) allowing for mixed-strategies. We analyze the dynamics of the model with n CVs under the replicator equation. We find that the end points of the evolutionary dynamics include the pure-strategy consistent CVs. However, there are also mixed-strategy equilibria that occur: these are on the boundaries between the basins of attraction of the pure-strategy sinks. Further, we develop a more general notion of consistency which applies to mixed-strategy equilibria. In a three conjecture example, by conducting a global dynamics analysis, we prove that in contrast to the pure-strategy equilibria, the mixed-strategy equilibria are not ESS: under the replicator dynamics, there are three or four mixed equilibria that may either be totally unstable (both eigenvalues positive), or saddle-stable (one stable eigenvalue). There also exist heteroclinic orbits that link equilibria together. Whilst only the pure-strategies can be fully consistent, we find a lower bound for the probability that mixed strategy conjectures will be ex post consistent.

Item Type:	Monograph (Working Paper)
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Publisher:	Cardiff University
Date of First Compliant Deposit:	30 March 2016
Last Modified:	28 Oct 2022 10:21
URI:	https://orca.cardiff.ac.uk/id/eprint/77945

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