Simulating Conventions and Norms under Local Interactions and Imitation
Ille, Sebastian (2013) Simulating Conventions and Norms under Local Interactions and Imitation. LEM Working Paper Series, 2013 (4).
Abstract
This paper is based on Ille 2013. Both papers analyze the same model, but in contrast, this paper does not provide an analytical solution but rather resorts to simulations. This allows the reader, who is familiar with the former article, to retrace the results more thoroughly and without the requirement of a sophisticated mathematical background. Additionally, this paper illustrates the dynamics of the setting. Focus is placed on 2 × 2 Nash coordination games on a two-dimensional lattice. Players imitate the most successful player in their reference group (Moore neighborhood) in the former period. Similarly individual pay-off is only defined by the current strategic choice of this reference group. We observe that the long-term convention is defined by a trade-off between risk and efficiency and that player population converges to the Pareto dominant though risk inferior convention for a broad range of pay-off configurations. In the case of two player populations, the long-term convention is defined by the equilibrium granting the highest benefit to one population. Consequently, conventions illustrate a tendency to be inegalitarian.
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