Revisiting Individual Evolutionary Learning in the Cobweb Model – An Illustration of the Virtual Spite-Effect

Abstract

Abstract. We examine the Cournot oligopoly model in the context of social and individual learning. In both models of learning, firms update their decisions about how much to produce via variants of the genetic algorithm updating procedure. Arifovic (1994) found that both models of social and individual learning converged to the Walrasian, competitive equilibrium. Vriend (2000) reports that the model of social learning converges to the Walrasian equilibrium outcome, while the model of individual learning converges to the Cournot-Nash equilibrium. We revisit the issue and conduct simulations varying elements of the updating algorithms, as well as of the underlying economic model. In the analysis of the outcomes of our simulations, we conclude that the convergence to the Cournot-Nash equilibrium is due to two things: the specific way in which production rules' performance is evaluated coupled with a specific cost function specification.

Economic modeling using evolutionary algorithms: the effect of a binary encoding of strategies

“…To facilitate comparison, we consider exactly the same Cournot market as Alkemade et al (2006Alkemade et al ( , 2007Alkemade et al ( , 2009). For other studies in which quantity competition among firms is modeled using EAs, we refer to Arifovic (1994), Price (1997), Dawid and Kopel (1998), Franke (1998), Vriend (2000, Arifovic and Maschek (2006), Wheeler et al (2006), Casari (2008), and Maschek (2010.…”

“…In the individual learning approach, each agent learns exclusively from its own experience (e.g., Arifovic 1994;Price 1997;Arifovic and Maschek 2006;Casari 2008). This is modeled through the use of a separate EA for each agent.…”

“…This is modeled through the use of a single EA for all agents together. The social learning approach seems to be more popular than the individual learning approach (Arifovic and Maschek 2006). In this paper, we focus on the social learning approach.…”

“…For early research in which genetic algorithms are employed, we refer to Miller (1986Miller ( , 1996, Axelrod (1987), Marks (1992), Arifovic (1994Arifovic ( , 1996, Andreoni and Miller (1995), and Dawid (1996). Examples of more recent research can be found in the work of, among others, Lux and Schornstein (2005), Alkemade et al (2006Alkemade et al ( , 2007Alkemade et al ( , 2009), Arifovic and Maschek (2006), Wheeler et al (2006), Xu (2006), Casari (2008), and Maschek (2010).…”

“…If the agents whose behavior is being modeled have to make decisions that are intrinsically binary, such as decisions between cooperation and defection in a prisoner's dilemma (e.g., Axelrod 1987), the use of a binary encoding of strategies is a very natural choice. However, in the case of nonbinary decisions, such as decisions by firms on their production level (e.g., Arifovic 1994;Price 1997;Dawid and Kopel 1998;Franke 1998;Vriend 2000;Alkemade et al 2006Alkemade et al , 2007Alkemade et al , 2009; Arifovic and Maschek 2006;Wheeler et al 2006;Casari 2008;Maschek 2010), there is no clear reason for the use of a binary encoding of strategies.…”