Expectations, Animal Spirits, and Evolutionary Dynamics

Author: 
Angelo Antoci
Massimiliano Landi
Description: 
SMU ECONOMICS & STATISTICS WORKING PAPER SERIES Paper No. 10-2006
JEL codes: 
Organisation: 
Abstract: 
We consider a (deterministic) evolutionary model where players have dynamic expectations about the strategy distribution. We provide a global analysis of the co-evolution of play and expectations for a generic two{by{two game. Besides the the typical indeterminacy of the evolutionary dynamics, we find some other ones: for any initial strategy configuration the dynamics can converge to any asymptotically stable fixed point, for different initial values of the expectations. Moreover, starting from the same initial pair of strategy configuration and values of expectations, the dynamics may lead to different asymptotically stable fixed points for different parameters of the expectations.