nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2004‒12‒12
ten papers chosen by
Matthew Baker
US Naval Academy, USA

  1. Conventions - Some Conventional and Some Not So Conventional Wisdom By Siegfried Berninghaus; Werner Güth; Hartmut Kliemt
  2. Approximate Truth in Economic Modelling By Geoffrey Brennan; Werner Güth; Hartmut Kliemt
  3. Darwinism in Economics: From Analogy to Continuity By Christian Cordes
  4. Verified Trust: Reciprocity, Altruism, and Noise in Trust Games By Marius Brülhart; Jean-Claude Usunier
  5. Stochastic Evolution of Rules for Playing Normal Form Games By Fabrizio Germano
  6. Negative Reciprocity: The Coevolution of Memes and Genes By Daniel Friedman; Nirvikar Singh
  7. Vengefulness Evolves in Small Groups By Daniel Friedman; Nirvikar Singh
  8. Games without Rules By Flavio Menezes; John Quiggin
  9. Do Cultures Clash? Evidence from Cross-National Ultimatum Game Experiments By Swee Hoon Chuah; Robert Hoffmann; Martin Jones; Geoffrey Williams
  10. The formation of social preferences : some lessons from psychology and biology By Louis Lévy-Garboua; Claude Meidinger; Benoît Rapoport

  1. By: Siegfried Berninghaus; Werner Güth; Hartmut Kliemt
    Abstract: In this paper we consider conventions as regularities in behavior which help to solve coordination problems in a society. These problems can be formalized as non-cooperative games with several equilibria. We know that in such situations serious problems of equilibrium selection arise which cannot be solved by traditional game theoretical reasoning. Conventions seem to be a powerful tool to solve equilibrium selection problems in real world societies. Essentially, two questions will be addressed in this paper: a) Which conventions will emerge in a society? b) How can a society break away from an inferior and reach a superior convention? It turns out that "risk dominance" of a convention plays a crucial role in dealing with both questions and generally in the evolution of conventions.
    Date: 2004–11
  2. By: Geoffrey Brennan; Werner Güth; Hartmut Kliemt
    Abstract: Economic intuitions concerning rational behaviour in interactive social situations are shaped by idealized models which are regarded as "approximately true". But ideal models cannot be meaningfully deemed approximately true unless asymptotically convergent processes imply them as limit cases. We illustrate by various examples - infinitely patient customers on durable monopoly markets, homogeneity of commodities, super-games etc. - how this necessary methodological requirement is almost routinely neglected. On this basis we draw some conclusions concerning the continuity between abstract and less abstract models on the one and the world modelled by them on the other hand.
    Date: 2004–11
  3. By: Christian Cordes
    Abstract: Currently there is an ongoing discussion about how Darwinian concepts should be harnessed to further develop economic theory. Two approaches to this question, Universal Darwinism and the continuity hypothesis, are presented in this paper. It is shown whether abstract principles can be derived from Darwin’s explanatory model of biological evolution that can be applied to cultural evolution. Furthermore, the relation of the ontological basis of biological and cultural evolution is clarified. Some examples illustrate the respective potential of the two approaches to serve as a starting-point for theory development.
    Keywords: Economic selection theory, Economic theory development, Darwinism, Cultural evolution, Continuity hypothesis
    JEL: B41 B52 A12 D00 O10
    Date: 2004–11
  4. By: Marius Brülhart; Jean-Claude Usunier
    Abstract: Behavioral economists have come to recognize that reciprocity, the interaction of trust and trustworthiness, is a distinct and economically relevant component of individual preferences alongside selfishness and altruism. This recognition is principally due to observed decisions in experimental "trust games". However, recent research has cast doubt on the explanatory power of trust as a determinant of those decisions, suggesting that altruism may explain much of what "looks like" trust. Moreover, empirical tests for alternative behavioral determinants can be sensitive to experimental bias due to differences in protocols and framing. Therefore, we propose discriminatory tests for altruism and trust that can be based on within-treatment and within-subject comparisons, and we control for group attributes of experimental subjects. Our results support trust (i.e. expected reciprocation) as the dominant motivation for "trust like" decisions.
    Keywords: reciprocity; altruism; trust game; experimental error
    JEL: C91 D63 D64
    Date: 2004–10
  5. By: Fabrizio Germano
    Abstract: The evolution of boundedly rational rules for playing normal form games is studied within stationary environments of stochastically changing games. Rules are viewed as algorithms prescribing strategies for the different normal form games that arise. It is shown that many of the folk results of evolutionary game theory typically obtained with a fixed game and fixed strategies carry over to the present case. The results are also related to recent experiments on rules and games.
    Keywords: Rules, evolutionary dynamics, stochastic dynamics, bounded rationality, learning, normal form games
    JEL: C72 C73 D81 D83
    Date: 2004–06
  6. By: Daniel Friedman (University of California, Santa Cruz); Nirvikar Singh (University of California, Santa Cruz)
    Abstract: A preference for negative reciprocity is an important part of the human emotional repertoire. We model its role in sustaining cooperative behavior but highlight an intrinsic free-rider problem: the fitness benefits of negative reciprocity are dispersed throughout the entire group, but the fitness costs are borne personally. Evolutionary forces tend to unravel people’s willingness to bear the personal cost of punishing culprits. In our model, the countervailing force that sustains negative reciprocity is a meme consisting of a group norm together with low-powered (and low-cost) group enforcement of the norm. The main result is that such memes coevolve with personal tastes and capacities so as to produce the optimal level of negative reciprocity.
    Keywords: Altruism, reciprocity, negative reciprocity, coevolution
    JEL: C7 D8
    Date: 2004–12–06
  7. By: Daniel Friedman (University of California, Santa Cruz); Nirvikar Singh (University of California, Santa Cruz)
    Abstract: We discuss how small group interactions overcome evolutionary problems that might otherwise erode vengefulness as a preference trait. The basic viability problem is that the fitness benefits of vengeance often do not cover its personal cost. Even when a sufficiently high level of vengefulness brings increased fitness, at lower levels, vengefulness has a negative fitness gradient. This leads to the threshold problem: how can vengefulness become established in the first place? If it somehow becomes established at a high level, vengefulness creates an attractive niche for cheap imitators, those who look like highly vengeful types but do not bear the costs. This is the mimicry problem, and unchecked it could eliminate vengeful traits. We show how within-group social norms can solve these problems even when encounters with outsiders are also important.
    JEL: C7 D8
    Date: 2004–12–08
  8. By: Flavio Menezes (Australian National University); John Quiggin (Department of Economics, University of Queensland)
    Abstract: We introduce the notion of an outcome space, in which strategic interactions are embedded. This allows us to investigate the idea that one strategic interaction might be an expanded version of another interaction. We then characterize the Nash equilibria arising in such extensions and demonstrate a folk-type theorem stating that any individually rational element of the outcome space is a Nash equilibrium.
    Keywords: game theory
    JEL: C71
    Date: 2004–07
  9. By: Swee Hoon Chuah (Nottingham University Business School); Robert Hoffmann (Nottingham University Business School); Martin Jones (Department of Economic Studies, University of Dundee); Geoffrey Williams (Nottingham University Business School)
    Abstract: Economic, political and social globalisation entails increasing interaction between individuals of different cultures. While experimental economists have established differences between the behaviour within different cultures, the effect of cultural difference on cross-culture interactions has so far not been sufficiently explored. This paper reports on the results of experiments with ultimatum games designed for this purpose, in which Malaysian Chinese and UK subjects played opponents of their own as well as of the other culture. We find that cultural differences exist between the behaviour of Western and Asians interacting (a) within their own respective national groups, and (b) with members of the other group. This evidence is discussed in terms of the possibility of a 'clash of cultures'.
    Keywords: Note:
    JEL: C78 C91 D64 Z13
    Date: 2004–11–16
  10. By: Louis Lévy-Garboua (TEAM); Claude Meidinger (TEAM); Benoît Rapoport (TEAM)
    Abstract: The goal of this paper is to draw some lessons for economic theory from research in psychology, social psychology and, more briefly, in biology, which purports to explain the "formation" of social preferences. We elicit the basic mechanisms whereby a variety of social preferences are determined in a variety of social contexts. Biological mechanisms, cultural transmission, learning, and the formation of cognitive and emotional capacities shape social preferences in the long or very long run. In the short run, the built-in capacities are utilized by individuals to construct their own context-dependent social preferences. The full development of social preferences requires consciousness of the individual's similarities and differences with others, and therefore knowledge of self and others. A wide variety of context-dependent social preferences can be generated by just three cognitive processes : identification of self with known others, projection of known self onto partially unknown others, and categorization of others by similarity with self. The self can project onto similar others but is unable to do so onto dissimilar others. The more can the self identify with, or project onto, an other the more generous she will be. Thus the self will find it easier to internalize and predict the behavior of an in-group than an out-group and will generally like to interact more with the former than with the latter. The main social motivations can be simply organized by reference to social norms of justice of fairness that lead to reciprocal behavior, some kind of self-anchored altruism that provokes in-group favoritism, and social drives which determine an immediate emotional response to an experienced event like hurting a norm's violator or helping an other in need.
    Keywords: Formation of social preferences, psychology, social psychology sociale, biology
    JEL: B40 D63 D64 D70 D80 Z13
    Date: 2004–01

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