DYNAMICS AND RATIONALITY IN ORDERED EXTERNALITY GAMES

We describe a class of games in which the players' payoffs depend only on their own play and an externality, which we call ordered externali ty games (OEGs). These include service facilities with customer self-s election and cost-sharing games. We then analyze the dynamics of these games assuming best-reply (Cournot) dynamics. Finally, we prove that any OEG which is convergent under best-reply dynamics is also converge nt under adaptive learning. This allows us to compute the convergence properties of an OEG easily. (C) 1996 Academic Press, Inc.