nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2007‒04‒14
four papers chosen by
Matthew Baker
City University of New York

  1. Social Norms By H. Peyton Young
  2. Rapid Evolution under Inertia By Thomas W.L. Norman
  3. Learning to Forgive By Thomas W.L. Norman
  4. Truth and Trust in Communication: An Experimental Study of Behavior under Asymmetric Information By Rode, Julian

  1. By: H. Peyton Young
    Abstract: The function of a social norm is to coordinate people`s expectations in interactions that possess multiple equilibria. Norms govern a wide range of phenomena, including property rights, contracts, bargains, forms of communication, and concepts of justice. Norms impose uniformity of behavior within a given social group, but often vary substantially among groups. Over time norm shifts may occur, prompted either by changes in objective circumstances or by subjective changes in perceptions and expectations. The dynamics of this process can be modeled using evolutionary game theory, which predict that some norms are more stable than others in the long run.
    Keywords: Norms, Institutions, Equilibrium Selection
    JEL: C73 B52 K0
    Date: 2007
  2. By: Thomas W.L. Norman
    Abstract: This paper demonstrates that inertia driven by switching costs leads to more rapid evolution in a class of games that includes m x m pure coordination games. Under the best-response dynamic and a fixed rate of mutation, the expected waiting time to reach long-run equilibrium is of lower order in the presence of switching costs, due to the creation of new absorbing "inertia" states that allow Ellison`s (Review of Economic Studies 67, 2000, 17-45) "step-by-step" evolution to occur.
    Keywords: Evolution, Mutations, Long-run Equilibrium, Waiting Times, Inertia, Switching Costs
    JEL: C72 C73
    Date: 2007
  3. By: Thomas W.L. Norman
    Abstract: The Folk Theorem for infinitely repeated games offers an embarrassment of riches; nowhere is equilibrium multiplicity more acute. This paper selects amongst these equilibria in the following sense. If players learn to play an infinitely repeated game using classical hypothesis testing, it is known that their strategies almost always approximate equilibria of the repeated game. It is shown here that if, in addition, they are sufficiently "conservative" in adopting their hypotheses, then almost all of the time is spent approximating an efficient subset of equilibria that share a "forgiving" property. This result provides theoretical justification for the general sense amongst practitioners that efficiency is focal in such games.
    Keywords: Repeated Games, Folk Theorem, Learning, Hypothesis Testing, Equilibrium Selection
    JEL: C72 C12
    Date: 2006
  4. By: Rode, Julian (Universitat Pompeu Fabra)
    Abstract: The paper presents an experimental study of truth telling and trust in communication under asymmetric information. In a two-player Communication Game (cf., Gneezy, 2005), an informed “advisor” sends a message to an uninformed “decision maker”, who then has to decide whether to follow the advice. The advisor may gain more by lying in the message. In two treatments, either a cooperative or a competitive context is induced before participants play the Communication Game. Advisors are unaffected by this contextual variation. In contrast, decision makers in the competitive context trust the advice less than in the cooperative context. The data provide evidence that this change in trust is due to different perceptions of the incentive structure. Individual differences in behavior can be related to certain personal characteristics (field of studies, gender, personality test scores). The data are largely in line with Subjective Equilibrium Analysis (Kalai & Lehrer, 1995).
    Keywords: experimental economics; truth telling; trust; asymmetric information; individual differences; context effects; subjective beliefs
    JEL: D01 D80 Z13
    Date: 2007–04–10

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