nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2008‒03‒08
six papers chosen by
Matthew Baker
City University of New York

  1. Doubts and equilibria By Antonio Cabrales; Jose Ramon Uriarte
  2. Isolation, Assurance and Rules : Can Rational Folly Supplant Foolish Rationality? By Peter J. Hammond
  3. On the stability of equilibria in replicator dynamics modelling: an application in industrial dynamics considering resource constraints By Torben Klarl
  4. An Evolutionary Framework for Determining Heterogeneous Strategies in Multi-Agent Marketplaces By Babanov, A.; Ketter, W.; Gini, M.
  5. Presentation Effects in Cross-Cultural Experiments - An Experimental Framework for Comparisons By Sebastian J. Goerg; Gari Walkowitz
  6. Foundations of Intrinsic Habit Formation By Kareen Rozen

  1. By: Antonio Cabrales; Jose Ramon Uriarte
    Abstract: In real life strategic interactions decision-makers are likely to entertain doubts about the degree of optimality of their play. To capture this feature of real choice-making, we present here a model based on the doubts felt by an agent about how well is playing a game. The doubts are coupled with (and mutually reinforced by) imperfect discrimination capacity, which we model here by means of similarity relations. We assume that each agent builds procedural preferences defined on the space of expected payoffsstrategy frequencies attached to his current strategy. These preferences, together with an adaptive learning process lead to doubt-based selection dynamic systems. We introduce the concepts of Mixed Strategy Doubt Equilibria, Mixed Strategy Doubt-Full Equilibria and Mixed Strategy Doubtless Equilibria and show the theoretical and the empirical relevance of these concepts
    Keywords: Doubts, Bounded rationality, Evolutionary dynamics, Decision theory
    JEL: C72 C73 D81
    Date: 2008–02
  2. By: Peter J. Hammond (Department of Economics, University of Warwick)
    Abstract: Consider an “isolation paradox” game with many identical players. By definition, conforming to a rule which maximizes average utility is individually a strictly dominated strategy. Suppose, however, that some players think “quasi-magically” in accordance with evidential (but not causal) decision theory. That is, they act as if others’ disposition to conform, or not, is affected by their own behavior, even though they do not actually believe there is a causal link. Standard game theory excludes this. Yet such “rational folly” can sustain “rule utilitarian” cooperative behavior. Comparisons are made with Newcomb’s problem, and with related attempts to resolve prisoner’s dilemma.
    Date: 2008
  3. By: Torben Klarl (University of Augsburg, Department of Economics)
    Abstract: Replicator dynamic modelling (rdm) is used to discuss industrial evolution problems with heterogeneous agents. However, some of the models tend to be very complex and, therefore, analytical solutions cannot be obtained. Hence, the paper proposes to start with a relatively simple model and check its stability of the equilibria before expanding the model. This strategy is more effective than relying on simulation based studies where instability cannot be ruled out ex ante. Thus, the aim of this paper is to introduce a stability check for rdm, especially, if one ore more real Eigenvalues with value zero occur. Besides the (Strogatz, 1994) and (Hilborn, 1994) local stability theorem, this method provides an alternative and more flexible procedure for stability analysis for rdm. To apply this approach, an industrial replicator dynamic model containing three differential equations is set up.
    Keywords: Evolutionary economics, Replicator dynamics
    JEL: B25 C62
    Date: 2008–03
  4. By: Babanov, A.; Ketter, W.; Gini, M. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: We propose an evolutionary approach for studying the dynamics of interaction of strategic agents that interact in a marketplace. The goal is to learn which agent strategies are most suited by observing the distribution of the agents that survive in the market over extended periods of time. We present experimental results from a simulated market, where multiple service providers compete for customers using different deployment and pricing schemes. The results show that heterogeneous strategies evolve and co-exist in the same market.
    Keywords: trading agents;multi-agent systems;genetic algorithms;simulation
    Date: 2008–01–17
  5. By: Sebastian J. Goerg; Gari Walkowitz
    Abstract: This paper investigates the impact of game presentation dependent on   ethnical affiliation. Two games representing the same logical and strategical problem are   introduced. Presented games are continuous prisoner’s dilemma games where decision makers   can choose an individual level of cooperation from a given range of possible actions. In the   first condition, a positive transfer creates a positive externality for the opposite player. In   the second condition, this externality is negative. Accomplishing a cross-cultural experimental   study involving subjects from the West Bank and Jerusalem (Israel) we test for a strategic   presentation bias applying these two conditions. Sub jects in the West Bank show a substantially   higher cooperation level in the positive externality treatment. In Jerusalem no   presentation effect is observed. Critically discussing our findings, we argue that a cross-cultural   comparison leads to only partially meaningful and opposed results if only one treatment   condition is evaluated. We therefore suggest a complementary application and consideration of   different presentations of identical decision problems within cross-cultural research.
    Keywords: Cooperation, presentation of decision problems, framing, methodology, cross-cultural research
    JEL: A13 C72 C91 F51 Z13
  6. By: Kareen Rozen (Cowles Foundation, Yale University)
    Abstract: We provide theoretical foundations for several common (nested) representations of intrinsic linear habit formation. These representations are dynamically consistent and additive, with geometrically decaying coefficients of habit formation. Our axiomatization introduces a revealed preference theory of weaning a decision-maker from her habits using the device of compensation. We characterize linear habit formation in terms of the ability to wean using uniquely determined compensating streams. Moreover, we distinguish between habits that are responsive to weaning and those that are persistent, develop a simple choice-theoretic measure of the rate of habit decay, and demonstrate how to recover the entire sequence of habit formation coefficients from observed choice behavior. We introduce novel monotonicity and separability axioms that are appropriate for time-nonseparable preferences. Our analysis suggests techniques for eliciting dynamic reference points from choice behavior and obtaining discounted utility representations on endogenously generated auxiliary spaces.
    Keywords: Linear habit formation, Time-nonseparable preferences, Compensation, Weaning, Compensated separability, Gains monotonicity, Endogenously generated auxiliary spaces
    JEL: C60 D11 D90
    Date: 2008–03

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