Economics X Paper Model Thirty-Three
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This paper introduces Systemic Feedback Equilibria (SFE), a novel solution concept in game theory where player strategies and the underlying game structure co-evolve. Departing from static frameworks, we model games in which payoffs and action sets adjust endogenously based on aggregate player behavior, capturing the dynamic interplay between individual optimization and systemic adaptation. We formalize SFE as a fixed point where no player unilaterally deviates from their strategy, and the game’s rules stabilize under a feedback mapping. Existence is established under continuity and compactness conditions, while uniqueness holds with additional concavity restrictions on the feedback function. We characterize SFE in a class of resource allocation games, demonstrating how rational play can entrench collectively suboptimal outcomes—a phenomenon we term “systemic lock-in.” Comparative statics reveal that equilibrium welfare is highly sensitive to the feedback rule’s curvature, offering a formal basis to distinguish individual responsibility from structural design. Applied to a tax compliance setting, the model predicts persistent evasion when enforcement adapts sluggishly, aligning with empirical stylized facts. These results suggest SFE provides a unifying lens for phenomena where traditional equilibria fail to account for rule endogeneity, with implications for institutional design and policy analysis.
Opoku-Agyemang, Kweku (2025). "Systemic Feedback Equilibria: Co-Evolution of Strategies and Rules in Strategic Settings." Development Economics X Paper Model Thirty-Three.
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