Paradox Lost: The Evolution of Strategies in Selten's Chain Store Game

Authors:
William M. Tracy
Affiliations:
Rensselaer Polytechnic Institute, Lally School of Management and Technology, Troy, USA 12180
Venue:
Computational Economics
Year:
2014

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Abstract

The classical game theoretic resolutions to Selten's Chain Store game are unsatisfactory; they either alter the game to avoid the paradox or struggle to organize the existing experimental data. This paper applies co-evolutionary algorithms to the Chain Store game and demonstrates that the resulting system's dynamics are neither intuitively paradoxical nor contradicted by the existing experimental data. Specifically, some parameterizations of evolutionary algorithms promote genetic drift. Such drift can lead the system to transition among the game's various Nash Equilibria. This has implications for policy makers as well as for computational modelers.