Equilibrium selection and the dynamic evolution of preferences

A population of fully rational agents plays a symmetric 2-player game in biological fitnesses, but each agentʼs play is determined by his payoffs, which are free to evolve according to “survival of the fittest” pressures. An equilibrium-selection mechanism is assumed to exist, and deliver a unique outcome for any given profile of payoffs; this allows the evolution of payoffs to be modeled as a well-defined replicator dynamics. The existing static stability results that “efficient strict Nash implies stability” and “stability implies efficiency” are translated to this dynamic context, although the latter gives way to indeterminacy in the absence of a specific equilibrium-selection mechanism. A strong form of stability is established for the efficient outcome of games with common interests, whilst a weaker stability result is provided for efficient mixed-strategy equilibria of doubly symmetric games. The results are illustrated using the equilibrium-selection mechanism provided by global games. ► Model of the evolution of preferences under the replicator dynamics. ► Efficient strict Nash outcomes are stable. ► The efficient outcome of games with common interests is stable in a strong sense. ► Efficient mixed equilibria of doubly symmetric games are stable in a weaker sense. ► Stable outcomes are efficient under certain equilibrium-selection mechanisms.