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Incomplete Information, Dynamic Stability and the Evolution of Preferences: Two Examples

  • Author(s): Rabanal, JP;
  • Friedman, D
  • et al.
Abstract

We illustrate general techniques for assessing dynamic stability in games of incomplete information by re-analyzing two models of preference evolution, the Arce (Econ. Inq. 45(4):708–720, 2007) Employer–Worker game and the Friedman and Singh (Games Econ. Behav. 66:813–829, 2009) Noisy Trust game. The techniques include extensions of replicator and gradient dynamics, and for both models they confirm local stability of the key static equilibria. That is, we obtain convergence in time average for initial conditions sufficiently near equilibrium values.

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