nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2006‒11‒18
four papers chosen by
Matthew Baker
US Naval Academy, USA

  1. A Psychological Game with Interdependent Preference Types By J. Atsu Amegashie
  2. Design of Public Voluntary Environmental Programs for Nitrate Pollution in Agriculture: An Evolutionary Approach By Anastasios Xepapadeas et al; Constadina Passa
  3. Regulation and Evolution of Compliance in Common Pool Resources By Anastasios Xepapadeas
  4. An Evolutionary Theory of Inflation Inertia By Alexis Anagnostopoulos; Italo Bove; Karl Schlag; Omar Licandro

  1. By: J. Atsu Amegashie
    Abstract: In psychological games, higher-order beliefs, emotions, and motives - in addition to actions - affect players’ payoffs. Suppose you are invited to a party, movie, dinner, etc not because your company is desired but because the inviter would feel guilty if she did not invite you. In all of these cases, it is conceivable that the intention behind the action will matter and hence will affect your payoffs. I show that this social interaction is a psychological game. However, under certain conditions, it is a special case of games with interdependent preference types as studied in Gul and Pesendorfer (2005). I find a complex social interaction in this game. In particular, there exists a unique equilibrium in which a player may stick to a strategy of accepting every invitation with the goal of discouraging insincere invitations. This may lead one to erroneously infer that this player is eagerly waiting for an invitation, when indeed his behavior is driven more by strategic considerations than by an excessive desire for social acceptance. The discussion shows that while games with interdependent preference types can capture phenomena that psychological games seek to address, the intuition, motivation, or explanation for the same phenomenon may be different. I discuss how being tolerated but not being truly accepted can explain the rejection of mutually beneficial trades, the choice of identity, social exclusion, marital divorce, and political correctness.
    Keywords: guilt, intentions, interdependent preference types, psychological game, second-order beliefs, social interaction
    JEL: C73 J16 Z13
    Date: 2006
  2. By: Anastasios Xepapadeas et al (Department of Economics, University of Crete, Greece); Constadina Passa (Department of Economics, University of Crete, Greece)
    Abstract: The joint evolution of participation and compliance of farmers in a public VA, along with the evolution of the pollution stock is examined. Replica- tor dynamics, modeling participation and compliance, are combined with pollution stock dynamics. Fast-slow selection dynamics are used to capture the fact that distinct decisions to participate in and comply with the public VA evolve in di¤erent time scales. Conditions for evolutionary equilibria and evolutionary stable strategies regarding participation and compliance are derived. Depending on the structure of the legislation and auditing probability, polymorphic equilibria indicating partial participation and par- tial compliance or monomorphic equilibria of full (or non) compliance could be the outcome of the evolutionary processes. Multiple equilibria and irre- versibilities are possible, while convergence to evolutionary equilibria could be monotonic or oscillating. Full participation and compliance can be at- tained if the regulator is pre-committed to certain legislation and inspection probabilities, or by appropriate choices of the legislatively set emission level and the non-compliance …ne. Budget constraints associated with monitoring costs seem to produce polymorphic equilibria.
    Keywords: Voluntary agreements, participation, compliance, evolution-
    JEL: Q2 L5
    Date: 2005
  3. By: Anastasios Xepapadeas (Department of Economics, University of Crete, Greece)
    Abstract: The paper jointly models the evolution of compliance with regulation and the evolution of a CPR stock, by combining replicator dynamics describing compliance with harvesting rules, with resource stock dynamics. This evolutionary approach suggests that coexistence, in long run equilibrium, of both cooperative and non-cooperative rules under regulation is possible. Stock effects on profits and a certain structure of auditing probabilities could imply the emergence of a limit cycle in areas of low stock levels, as an equilibrium outcome for compliance and the biomass stock. It might be easier for the regulator to obtain full compliance under precommitment to fixed auditing probabilities.
    Keywords: Common pool resources (CPR), harvesting, regulation, replicator dynamics, compliance
    JEL: Q20 Q22 C61
  4. By: Alexis Anagnostopoulos; Italo Bove; Karl Schlag; Omar Licandro
    Abstract: We provide a simple theory of in.ation inertia in a staggered price setting framework a la Calvo (1983). Contrary to Calvo.s formulation, the frequency of price changes is allowed to vary according to an evolutionary criterion. Inertia is the direct result of gradual adjustment in this frequency following a permanent change in the rate of money growth.

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