Now showing items 1-1 of 1
Fast equilibrium selection by rational players living in a changing world
(The Econometric Society, 2001-01)
We study a coordination game with randomly changing payoffs and small frictions in changing actions. Using only backwards induction, we find that players must coordinate on the risk-dominant equilibrium. More precisely, a continuum of fully rational players are randomly matched to play a symmetric 2 x 2 game. The payoff matrix ...