SFB 303 Discussion Paper No. B-299

Author: Schlag, Karl H.

Title: When Does Evolution Lead to Efficiency in Communication Games?

Abstract: The evolutionary selection of outcomes (modelled using the replicator dynamics) in games with costless communication depends crucially on the structural assumptions made on the underlying population. (1) In conflicts between two interacting populations, common interest implies that the set of efficient outcomes is the unique evolutionarily stable set. Lack of common interest prevents sets with minimal stability properties to exist. (2) For conflicts within one population, inefficient evolutionarily stable strategies may exist independent of whether there is common interest or not. This is no longer true when there is a dominant strategy, in this case the efficiency result of the two population setup is recovered.

Keywords: Cheap talk, efficiency, common interest, evolutionarily stable set, strict equilibrium set, asymptotic stability, minimal attracting set, replicator dynamics.

JEL-Classification-Number: C79

Creation-Date: December, 1994
URL: ../1994/b/bonnsfb299.pdf

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