Paradox Lost: The Evolution of Strategies in Selten’s Chain Store Game
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The classical game theoretic resolutions to Selten’s Chain Store game are unsatisfactory; they either alter the game to avoid the paradox or struggle to organize the existing experimental data. This paper applies co-evolutionary algorithms to the Chain Store game and demonstrates that the resulting system’s dynamics are neither intuitively paradoxical nor contradicted by the existing experimental data. Specifically, some parameterizations of evolutionary algorithms promote genetic drift. Such drift can lead the system to transition among the game’s various Nash Equilibria. This has implications for policy makers as well as for computational modelers.
KeywordsMarket entry Evolutionary Computation Genetic drift Equilibria selection Chain Store Paradox Genetic Algorithms
This work benefited substantially from conversations with John Miller, Bill McKelvey, Scott Carr, and John Holland. Comments from Computational Economics Editor Hans Amman and anonymous reviewers also significantly improved this paper.
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