nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2007‒06‒23
three papers chosen by
Matthew Baker
City University of New York

  1. Allocation of scarce resources when rationality is one of them: some consequences of cognitive inequalities for theory and policy By Pelikan, Pavel
  2. An Operational Measure of Riskiness By Dean Foster; Sergiu Hart
  3. Friendship Selection By Javier Rivas

  1. By: Pelikan, Pavel
    Abstract: "Rationality" is understood in the empirical sense of cognitive abilities of human brains for solving economic problems, and consequently recognized bounded in individually unequal ways. This is shown to require treating it as a unique scarce resource, used for deciding on its own uses. This uniqueness disturbs axiomatic economics by a tangled hierarchy, and implies that rationality-allocation can approach efficiency only by means of an institutionally shaped trial-and-error evolution. Applied to the markets vs. government issue, a comparative institutional analysis of rationality-allocation yields novel insights with non-standard policy implications, and thus demonstrates that rationality-allocation matters.
    Keywords: unequally bounded rationality; rationality-allocation; tangled hierarchy; institutionally shaped evolution; comparative institutional analysis
    JEL: P5 D6 H1 D72
    Date: 2007–05
  2. By: Dean Foster; Sergiu Hart
    Date: 2007
  3. By: Javier Rivas
    Abstract: We model the formation of friendships as repeated cooperation within a set of heterogeneous players. The model builds around three of the most important facts about friendship: friends help each other, there is reciprocity in the relationship and people usually have few friends. In our results we explain how similarity between people affects the friendship selection. We also characterize when the friendship network won’t depend on the random process by which people meet each other. Finally, we explore how players’ patience influences the length of their friendship relations. Our results match and explain empirical evidence reported in social studies on friendship. For instance, our model explains why troublesome subjects have few friends.
    Keywords: Friendship, cooperative game, grim trigger strategy, social networks
    JEL: C72 C73 Z13
    Date: 2007

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