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arXiv · 2009.12910

Stochastic Stability of a Recency Weighted Sampling Dynamic

Alexander Aurell·Gustav Karreskog
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Abstract

We introduce and study a model of long-run convention formation for rare interactions. Players in this model form beliefs by observing a recency-weighted sample of past interactions, to which they noisily best respond. We propose a continuous state Markov model, well-suited for our setting, and develop a methodology that is relevant for a larger class of similar learning models. We show that the model admits a unique asymptotic distribution which concentrates its mass on some minimal CURB block configuration. In contrast to existing literature of long-run convention formation, we focus on behavior inside minimal CURB blocks and provide conditions for convergence to (approximate) mixed equilibria conventions inside minimal CURB blocks.

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Alexander Aurell, Gustav Karreskog. 2020-09-27. Stochastic Stability of a Recency Weighted Sampling Dynamic. https://arxiv.org/abs/2009.12910

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