Stability and Encoding

Abstract

The main purpose of these notes is to demonstrate that genetic learning is a plausible model of interaction between economic agents and to study the long term properties of this learning process. Thus we have carried out a dynamical analysis which should answer the key questions for any economic learning rule and have demonstrated the results with examples of economic models. Keeping in mind our behavioral interpretation of the considered process the obtained insights provide information about adaptive learning per se. Besides these economic implications the results of chapter 4 may also be very useful for the appropriate shaping of the algorithm and for the correct interpretation of the results. In this chapter we concentrate on this aspect of genetic learning because we think that our mathematical analysis may be of great help for anyone who actually implements a simulation of an economic system with a GA. In particular we will provide a method which facilitates the learning of economic equilibria in a model. This may be of great importance if we consider simulations in models where the equilibria are not known a priori. In such models a GA may be a useful tool to determine equilibria. Therefore a technique which facilitates the reaching of equilibria is of great importance.