Reference-dependent preferences, super-dominance and stochastic stability

• SAWA, Ryoji

• Wu, Jiabin

Abstract

This paper investigates stochastic stability of noisy best response dynamics with reference-dependent preferences. We define a strategy as super-dominant in a 2×2 coordination game if it is the maximin strategy in terms of monetary returns and the state that all players play it constitutes an equilibrium which Pareto-dominates all other equilibria. If such a strategy exists, the corresponding equilibrium, which we call the super-dominant equilibrium, is uniquely stochastically stable for the BRM choice rule (the best response choice rule with uniform random errors) given any model of reference-dependent preferences. However, for any 2×2 coordination game with a super-dominant strategy, there exists a model of reference-dependent preferences with which the super-dominant equilibrium fails to be stochastically stable for the logit choice rule.

Journal

• Journal of mathematical economics

  Journal of mathematical economics 78 96-104, 2018-10

  Elsevier

Keywords

• Applied Mathematics
• Economics and Econometrics

Details

• CRID: 1050001339199005184
• NII Article ID: 120007133431
• NII Book ID: AA00252858
• ISSN: 03044068
• DOI: 10.1016/j.jmateco.2018.08.002
• HANDLE: 2241/00157672
• Web Site: https://tsukuba.repo.nii.ac.jp/records/52244
• Web Site: https://api.elsevier.com/content/article/PII:S0304406818300880?httpAccept=text/xml
• Web Site: https://api.elsevier.com/content/article/PII:S0304406818300880?httpAccept=text/plain
• Text Lang: en
• Article Type: journal article
• Data Source:
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  • CiNii Articles
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