Idiosyncratic and Aggregate Time-Varying Mutation Rates in Coordination Games
We extend the standard evolutionary model of Kandori, Mailath, and Rob (1993) to incorporate time-varying aggregate and idiosyncratic shocks separately in coordination games. We show that both types of shocks have a different effect on the invariant distribution over the different equilibria of dthe game. While idiosyncratic shocks are shown to be neutral, the aggregate shocks introduce a systematic bias against the risk dominant equilibrium.<BR> Different from Kandori, Mailath, and Rob (1993) we derive a sufficient condition under which this bias prevents equilibrium selection with probability one.