A key assumption in traditional game theory is that all players are completely rational. This sometimes leads to absurd conclusions. One part of this project is to continue exploring the implications of more evolution-based hypotheses about behavior in games. Within economic theory, three problems are addressed. First, recent strategic-game models of the problems associated with the massive debt owed by certain sovereign nations to private commercial banks have yielded provocative but counterfactual predictions. The goal here is to see whether the results change. Second, in some economic games a counterintutive theoretical result has emerged: that more competition on one side of a market leads to a price change in the wrong direction. The intention here is to explore the general class of market games in which this phenomenon arises. Third, adopting the view that government decision-making is a complicated ongoing bargaining process involving competing and overlapping constituencies, bargains struck at one point in time necessarily have implications for what will confront future bargainers; yet there is no way that compromises can be agreed to by the as-yet-nonexistent players. The aim here is to explore the extent of the social inefficiencies that inevitably result. The research on evolution and bounded rationality in games is especially exciting. One of the major problems with bounded rationality is modeling the limitations on rationality in a way that is not arbitrary or only descriptive. In this project economic agents use a variety of rules of thumb for bounded rationality reasons. These rules are applied across a number of different social situations and evolutionary processes. The frequencies of the specific rules found in a society are derived. For instance, one might imagine that in a society in which the rule of thumb "avoid risky investments" was widely practiced, the prospects for high payoff (at least temporarily) from more aggressive strategies might be better on average than in other societies, although not in all situations. This in turn might lead to an invasion of such strategies and the subsequent relative success in turn of more conservative strategies. This project develops analytic tools that permit us to determine under what conditions a steady state with a blend of behaviors comes about and under what conditions perpetual periodic waves occur.
