nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2006‒07‒09
five papers chosen by
Matthew Baker
US Naval Academy, USA

  1. Punishment, Inequality and Emotions By David Masclet; Marie-Claire Villeval
  2. Satisficing or Optimizing? - An Experimental Study By Werner Güth; Gerlinde Fellner; Ev Martin
  3. Task Transcending Satisficing - An Experimental Study By Werner Güth; Gerlinde Fellner; Ev Martin
  4. Institutions as Determinants of Preference Change – A One Way Relation? By M. Binder; U. Niederle
  5. Differentiated duopoly with "Elimination by Aspects" By Reynald-Alexandre Laurent

  1. By: David Masclet; Marie-Claire Villeval (GATE CNRS)
    Abstract: Cooperation among people who are not related to each other is sustained by the availability of punishment devices which help enforce social norms (Fehr and Gächter, 2002). However, the rationale for costly punishment remains unclear. This paper reports the results of an experiment investigating inequality aversion and negative emotions as possible determinants of punishment. We compare two treatments of a public good game, one in which costly punishment reduces the immediate payoff inequality between the punisher and the target, and one in which it does not affect inequality. We show that while inequality-aversion prevents some subjects from punishing in the equal cost treatment, negative emotions are the primary motive for punishment. Results also indicate that the intensity of punishment increases with the level of inequality, and reduces earnings inequality over time.
    Keywords: cooperation, experiment, free-Riding, inequity aversion, negative emotions
    JEL: A13 C92 D63
    Date: 2006–04
  2. By: Werner Güth; Gerlinde Fellner; Ev Martin
    Abstract: This experimental study investigates whether individuals prefer bounded rationality over rational choice theory when facing simple investment tasks. First, participants state some personal parameters that serve as an input to render a theoretical approach, namely satisficing or optimality, applicable. Then, they are guided through the decision making process where either ‘satisficing’ or ‘optimality’ is suggested and has to be implemented. The behavioral appeal of the two approaches is measured by the adjustments of personal parameters until accepting the investment decision suggested by theory. Additionally, a questionnaire is administered to elicit subjective contentment with the two approaches.
    Keywords: Theory absorption; Satisficing behavior; Portfolio selection
    JEL: C91 D81 G11
    Date: 2006–07
  3. By: Werner Güth; Gerlinde Fellner; Ev Martin
    Abstract: The paper explores the applicability of bounded rationality theory. In particular, we investigate whether basic principles of aspiration formation and satisficing behavior are transferable between similar situations. Individuals are sequentially confronted with two risky investment tasks, a simple and a more complex one. Initially elicited state-contingent aspirations can be used to predict actual portfolio selection in both tasks. We explore whether individual characteristics of satisficing apply to both scenarios. Results indicate that stated aspirations frequently cannot be fulfilled. However, aspiration formation itself is highly transferable between tasks.
    Keywords: bounded rationality; aspirations; investment decisions
    JEL: C91 D81 G11
    Date: 2006–07
  4. By: M. Binder; U. Niederle
    Abstract: In recent economic literature, there has been an increasing interest in modelling preferences as endogenous. Some arguments go along the lines that institutions shape preferences. This paper suggests that adopting a more substantive concept of preferences furthers our understanding of how they systematically shape institutions. We integrate social-psychological concepts and combine them with an account of learning. Thus, a model of the dynamic interrelation between preferences and institutions can be developed. While institutional change can certainly be partly explained in terms of changing incentives, we offer an approach that goes beyond the standard explanation.
    Keywords: endogenous preferences, institutional change, learning, attitudes, wants, social instincts
    JEL: O12 D79 Z00
    Date: 2006–07
  5. By: Reynald-Alexandre Laurent
    Abstract: "Elimination by aspects" (EBA) is a discrete model of probabilistic choice worked out by Tversky in 1972 which supposes that decision makers follow a particular heuristic during a process of sequential choice. Options are described by their attributes and, at each decision stage, the individuals eliminate all the options not having an expected given attribute, and so until only one option remains. In this paper, probabilities resulting from the EBA model are used to construct demands of a differentiated duopoly with imperfect rationality. These demands are consistent with partial heterogeneity of tastes and may be linked with a spatial framework in which consumers have convex perception of distance. In this model, a Nash price equilibrium in pure strategies exists if the cost of the highest attributes level firm is not too low. In this case, the "differentiation by attributes" form retained here is both horizontal and vertical, which is not very frequent in the literature. When the equilibrium does not exists, the interaction of best response functions of the firms induces an Edgeworth cycle instead of an exit of the lowest attributes level firm. This result underlines the role of cost difference in the existence of such a cycle.
    Date: 2006

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