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A Deterministic Approximation Approach to the Continuum Logit Dynamic with an Application to Supermodular Games

Author

Listed:
  • Ratul Lahkar

    (Ashoka University)

  • Sayan Mukherjee

    (ISI Kolkata)

  • Souvik Roy

    (ISI, Kolkata)

Abstract
We consider the logit dynamic in a large population game with a continuum of strategies. The deterministic approximation approach requires us to derive this dynamic as the finite horizon limit of a stochastic process in a game with a finite but large number of strategies and players. We first establish the closeness of this dynamic with a step–wise approximation. We then show that the logit stochastic process is close to the step–wise logit dynamic in a discrete approximation of the original game. Combining the two results, we obtain our deterministic approximation result. We apply the result to large population supermodular games with a continuum of strategies. Over finite but sufficiently long time horizons, the logit stochastic process converges to logit equilibria in a discrete approximation of the supermodular game. By the deterministic approximation approach, so does the logit dynamic in the continuum supermodular game

Suggested Citation

  • Ratul Lahkar & Sayan Mukherjee & Souvik Roy, 2022. "A Deterministic Approximation Approach to the Continuum Logit Dynamic with an Application to Supermodular Games," Working Papers 79, Ashoka University, Department of Economics.
    • Handle: RePEc:ash:wpaper:79
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    File URL: https://dp.ashoka.edu.in/ash/wpaper/paper79_0.pdf
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    References listed on IDEAS

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