Deductive versus inductive equilibrium selection: experimental results

Ernan Haruvy, Dale O. Stahl
2004 Journal of Economic Behavior and Organization  
The debate in equilibrium selection appears to have culminated in the formation of two schools of thought: those that favor equilibrium selection based on rational coordination and those that favor zero-rationality adaptation. We examine four deductive selection principles and find that each fails to explain experimental data. We propose an inductive selection principle based on simple learning dynamics. Using out-of-sample maximum likelihood parameters, the predictive performance of one such
more » ... namic is shown to be dramatically better than the deductive selection principles. However, this selection principle is not always definitive, since no dynamic is guaranteed to converge.
doi:10.1016/j.jebo.2002.10.001 fatcat:5mgaqvgborcgli2jeddxyccbva