Exact solution of a modified El Farol's bar problem: Efficiency and the role of market impact

We discuss a model of heterogeneous, inductive rational agents inspired by the El Farol Bar problem and the Minority Game. As in markets, agents interact through a collective aggregate variable -- which plays a role similar to price -- whose value is fixed by all of them. Agents follow a simple reinforcement-learning dynamics where the reinforcement, for each of their available strategies, is related to the payoff delivered by that strategy. We derive the exact solution of the model in the ``thermodynamic'' limit of infinitely many agents using tools of statistical physics of disordered systems. Our results show that the impact of agents on the market price plays a key role: even though price has a weak dependence on the behavior of each individual agent, the collective behavior crucially depends on whether agents account for such dependence or not. Remarkably, if the adaptive behavior of agents accounts even ``infinitesimally'' for this dependence they can, in a whole range of parameters, reduce global fluctuations by a finite amount. Both global efficiency and individual utility improve with respect to a ``price taker'' behavior if agents account for their market impact.Comment: 38 pages + 5 figures (needs elsart.sty). New results adde

Evolutionary game theory: Temporal and spatial effects beyond replicator dynamics

Evolutionary game dynamics is one of the most fruitful frameworks for studying evolution in different disciplines, from Biology to Economics. Within this context, the approach of choice for many researchers is the so-called replicator equation, that describes mathematically the idea that those individuals performing better have more offspring and thus their frequency in the population grows. While very many interesting results have been obtained with this equation in the three decades elapsed since it was first proposed, it is important to realize the limits of its applicability. One particularly relevant issue in this respect is that of non-mean-field effects, that may arise from temporal fluctuations or from spatial correlations, both neglected in the replicator equation. This review discusses these temporal and spatial effects focusing on the non-trivial modifications they induce when compared to the outcome of replicator dynamics. Alongside this question, the hypothesis of linearity and its relation to the choice of the rule for strategy update is also analyzed. The discussion is presented in terms of the emergence of cooperation, as one of the current key problems in Biology and in other disciplines.Comment: Review, 48 pages, 26 figure

Statistical mechanics of random two-player games

Using methods from the statistical mechanics of disordered systems we analyze the properties of bimatrix games with random payoffs in the limit where the number of pure strategies of each player tends to infinity. We analytically calculate quantities such as the number of equilibrium points, the expected payoff, and the fraction of strategies played with non-zero probability as a function of the correlation between the payoff matrices of both players and compare the results with numerical simulations.Comment: 16 pages, 6 figures, for further information see http://itp.nat.uni-magdeburg.de/~jberg/games.htm

Learning to coordinate in a complex and non-stationary world

We study analytically and by computer simulations a complex system of adaptive agents with finite memory. Borrowing the framework of the Minority Game and using the replica formalism we show the existence of an equilibrium phase transition as a function of the ratio between the memory $\lambda$ and the learning rates $\Gamma$ of the agents. We show that, starting from a random configuration, a dynamic phase transition also exists, which prevents the system from reaching any Nash equilibria. Furthermore, in a non-stationary environment, we show by numerical simulations that agents with infinite memory play worst than others with less memory and that the dynamic transition naturally arises independently from the initial conditions.Comment: 4 pages, 3 figure

Stochastic gain in population dynamics

We introduce an extension of the usual replicator dynamics to adaptive learning rates. We show that a population with a dynamic learning rate can gain an increased average payoff in transient phases and can also exploit external noise, leading the system away from the Nash equilibrium, in a reasonance-like fashion. The payoff versus noise curve resembles the signal to noise ratio curve in stochastic resonance. Seen in this broad context, we introduce another mechanism that exploits fluctuations in order to improve properties of the system. Such a mechanism could be of particular interest in economic systems.Comment: accepted for publication in Phys. Rev. Let

Social Aggregation as a Cooperative Game

A new approach for the description of phenomena of social aggregation is suggested. On the basis of psychological concepts (as for instance social norms and cultural coordinates), we deduce a general mechanism for the social aggregation in which different clusters of individuals can merge according to the cooperation among the agents. In their turn, the agents can cooperate or defect according to the clusters distribution inside the system. The fitness of an individual increases with the size of its cluster, but decreases with the work the individual had to do in order to join it. In order to test the reliability of such new approach, we introduce a couple of simple toy models with the features illustrated above. We see, from this preliminary study, how the cooperation is the most convenient strategy only in presence of very large clusters, while on the other hand it is not necessary to have one hundred percent of cooperators for reaching a totally ordered configuration with only one megacluster filling the whole system.Comment: 18 pages, 10 figure

Landscape and flux for quantifying global stability and dynamics of game theory

Game theory has been widely applied to many areas including economics, biology and social sciences. However, it is still challenging to quantify the global stability and global dynamics of the game theory. We developed a landscape and flux framework to quantify the global stability and global dynamics of the game theory. As an example, we investigated the models of three-strategy games: a special replicator-mutator game, the repeated prison dilemma model. In this model, one stable state, two stable states and limit cycle can emerge under different parameters. The repeated Prisoner's Dilemma system has Hopf bifurcation transitions from one stable state to limit cycle state, and then to another one stable state or two stable states, or vice versa. We explored the global stability of the repeated Prisoner's Dilemma system and the kinetic paths between the basins of attractor. The paths are irreversible due to the non-zero flux. One can explain the game for $Peace$ and $War$.Comment: 25 pages, 15 figure