An experimental investigation of stochastic adjustment dynamics

Wooyoung Lim, Philip Neary

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Abstract

This paper describes an experiment designed to test which, if any, stochastic adjustment dynamic most accurately captures the behaviour of a large population. The setting is a large population coordination game in which two different groups have differing preferences over equilibria. We find that subject behaviour is highly consistent with the myopic best-response learning rule with deviations from this rule that are (i) dependent on the myopic best-response payoff but not on the deviation payoff, and (ii) directed in the sense of being group-dependent. We also find a time trend to deviations, with the magnitude tapering off as time progresses. This is in contrast to much of the theoretical literature that supposes a variety of other specifications of learning rules and both time-independent and payoff-dependent explanations for deviations.
Original languageEnglish
Pages (from-to)208–219
Number of pages12
JournalGames and Economic Behavior
Volume100
Early online date4 Oct 2016
DOIs
Publication statusPublished - Nov 2016

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