Equilibrium selection via travelling waves

Josef Hofbauer

pp. 245-259

in: Werner Leinfellner, Eckehart Köhler (eds), Game theory, experience, rationality, Berlin, Springer, 1998

Abstract

Consider a game with multiple equilibria, say two strict Nash equilibria for simplicity. Suppose that in one part of the world one of these equilibria has become the standard, while the other part has somehow agreed to use the other equilibrium. This different evolution was made possible by an "iron curtain' separating the two parts. Suppose that now the iron curtain falls, and exchange of ideas and migration of players becomes possible. What will happen to the equilibria chosen? Which equilibrium will survive this process? Intuition suggests that the "dominant' equilibrium will drive out the other equilibrium in form of a travelling wave front.