nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2005‒10‒04
five papers chosen by
Matthew Baker
US Naval Academy, USA

  1. Merit, Approbation and the Evolution of Social Structure By Cowan ,Robin; Jonard ,Nicolas
  2. On the social dimension of time and risk preferences: An experimental study By M. Vittoria Levati; Werner Güth; Matteo Ploner
  3. Commitment and Self-Control By Jawwad Noor
  4. On Inequity Aversion By Werner Güth
  5. Satisficing in Financial Decision Making A Theoretical and Experimental Attempt to Explore Bounded Rationality By Gerlinde Fellner; Werner Güth; Boris Maciejovsky

  1. By: Cowan ,Robin; Jonard ,Nicolas (MERIT)
    Abstract: In this paper we study a society in which individuals gain utility from income and from social approbation. Income is correlated with class. Approbation is given to an unobservable trait, which must be signalled through the agent’s social mobility, i.e. class change. Mobility is driven by a simple mechanism involving inheritance, effort and ability. Thus social structure (class composition) is affected by individuals’ quest for approbation, and we study how that affects the emergence and multiplicity of long run social organizations, including hybrid forms of dynasties and meritocracies. Specifically we observe that even though social mobility is driven purely by a meritocratic mechanism, pure dynasties can emerge. We then introduce a feedback between the size of the upper class and its income value, so that effort levels and social structure are jointly endogenous. We derive results on equilibrium effort levels and stationary (when they exist) social structures. Social organization can converge to a unique steady state, multiple long run equilibria or cycles.
    Keywords: Economics of Technology;
    Date: 2005
  2. By: M. Vittoria Levati; Werner Güth; Matteo Ploner
    Abstract: We report on an experiment designed to explore the interrelation of other-regarding concerns with attitudes towards risk and delay when the latter have a social dimension, i.e., pertain to one's own and another person's payoffs. For this sake, we compare evaluations of several prospects, each of which allocates either certain or risky and either immediate or delayed payoffs to the actor and to another participant. We find that individuals are mainly self-oriented as to social allocation of risk and delay, although they are other-regarding with respect to expected payoff levels.
    Keywords: Willingness to accept, Risk attitudes, Time preferences, Other-regarding concerns
    JEL: C91 D63 D81
    Date: 2005–09
  3. By: Jawwad Noor (Boston University)
    Abstract: The literature on self-control problems has typically concentrated on immediate temptations. This paper studies a Gul and Pesendorfer (2001, 2004) style model in which decision-makers are affected by temptations that lie in the future. While temptation is commonly understood to give rise to a demand for commitment, it is shown that `temptation by future consumption' can induce its absence. The model also exhibits procrastination, provides an alternative to projection bias as an explanation for some experimental results, and can simultaneously account for myopic and hyperopic behavior. The evidence on preference reversals supports temptation by future consumption, and suggests that it may not be restricted to short time horizons.
    Keywords: Self-Control, Temptation, Commitment, Preference Reversals, Procrastination
    JEL: D1 D2 D3 D4
    Date: 2005–09–28
  4. By: Werner Güth
    Abstract: In close interaction, group allocations are often fair due to our desire to be treated fairly and to act fairly. When this desire conflicts with other strong motivations a typical reaction is to trade off fairness against these other concerns. Inequ(al)ity aversion allows capturing such trade off considerations in various ways (Bolton, 1991, Bolton and Ockenfels, 1998 and 2000, Fehr and Schmidt, 1999, are examples). Such trade off analysis measures how far one deviates from fairness what requires a unique fairness benchmark. More often than not there exist, however, multiple standards. In our view, this should not discourage using inequ(al)ity aversion altogether but limit it to where its prerequisites are granted.
    Date: 2005–09
  5. By: Gerlinde Fellner; Werner Güth; Boris Maciejovsky
    Abstract: In this paper, we apply the bounded rationality approach to an investment situation. In a simple setting where an investor decides between a riskless bond and a risky asset, we distinguish three aspiration levels: a lowest threshold which one wants to guarantee, the aspiration level given by investing all risk-free, and an even higher return level representing a real success. The ranges for such aspirations are naturally determined by the parameters. These three aspirations allow us to classify investors as actual or only potential satisficers, as well as risk shy or more open to risk. In the experiment, participants are first asked for their lowest and highest aspiration before investing. Thus, we can test whether they behave as predicted by their aspiration type. By presupposing specific cardinal utility functions, we also compare the bounded rationality approach to the rational choice-approach.
    Date: 2005–08

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