nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2008‒03‒25
six papers chosen by
Matthew Baker
City University of New York

  1. Professionals' endorsement of behavioral finance: Does it impact their perception of markets and themselves? By Menkhoff, Lukas; Nikiforow, Marina
  2. Learning by Trial and Error By H. Peyton Young
  3. How do people play against Nash opponents in games which have a mixed strategy equilibrium? By Jason Shachat; J. Todd Swarthout
  4. Incorporating fairness motives into the Impulse Balance Equilibrium concept: an application to experimental 2X2 games By Tavoni, Alessandro
  5. Self-Knowledge and Self-Deception By H. Peyton Young
  6. Comments on Neuroeconomics By Ariel Rubinstein

  1. By: Menkhoff, Lukas; Nikiforow, Marina
    Abstract: This paper provides evidence on the hypothesis that many behavioral finance patterns are so deeply rooted in human behavior that they are difficult to overcome by learning. We test this on a target group which has undoubtedly very strong incentives to learn efficient behavior, i.e. fund managers. We split this group into endorsers and non-endorsers of behavioral finance. Endorsers do, indeed, view markets differently as they regard stronger influences from behavioral biases. However, when it comes to the perception of one's own behavior the endorsement of behavioral finance becomes almost meaningless, even though endorsers otherwise do adapt behavior to their endorsement.
    Keywords: behavioral finance, fund managers, biasess
    JEL: G10 D83
    Date: 2008–03
  2. By: H. Peyton Young
    Abstract: A person learns by trial and error if he occasionally tries out new strategies, rejecting choices that are erroneous in the sense that they do not lead to higher payoffs. In a game, however, strategies can become erroneous due to a change of behavior by someone else. We introduce a learning rule in which behavior is condition on whether a player experiences an error of the first or second type. This rule, called interactive trial and error learning, implements Nash equilibrium behavior in any game with generic payoffs and at least one pure Nash equilibrium.
    Keywords: Learning, Adaptive Dynamics, Nash Equilibrium, Bounded Rationality
    JEL: C72 D83
    Date: 2008
  3. By: Jason Shachat; J. Todd Swarthout
    Abstract: We examine experimentally how humans behave when they, unbeknownst to them, play against a computer which implements its part of a mixed strategy Nash equilibrium. We consider two games, one zero-sum and another unprofitable with a pure minimax strategy. A minority of subjects' play was consistent with their Nash equilibrium strategy. But a larger percentage of subjects' play was more consistent with different models of play: equal-probable play for the zero-sum game, and the minimax strategy in the non-profitable game.
    Date: 2008–03
  4. By: Tavoni, Alessandro
    Abstract: Substantial evidence has been accumulated in recent empirical works on the limited ability of the Nash equilibrium to rationalize observed behavior in many classes of games played by experimental subjects. This realization has led to several attempts aimed at finding tractable equilibrium concepts which perform better empirically, often by introducing a reference point to which players compare the available payoff allocations, as in impulse balance equilibrium (Selten & Chmura, forthcoming) and in the inequity aversion model (Fehr & Schmidt,1999). The purpose of this paper is to review some features of this recent literature and to propose a new, empirically sound, unifying concept which combines elements of fairness with reference considerations.
    Keywords: Fairness; Inequity aversion; Aspiration level; Impulse balance; Behavioral economics; Experimental economics; Jacknife estimator
    JEL: D63 D01 C72 C91
    Date: 2007–10
  5. By: H. Peyton Young
    Abstract: A person is concerned about self-image if his utility function depends, not only on his actions, but also on his beliefs about what sort of person he is. This dual motivation problem makes it difficult, and in some cases impossible, for someone to learn who he really is based solely on his revealed behavior. Indeed, there are very simple situations, involving just two actions and two possible identities, such that, if there is any initial uncertainty about one's true identity, it will never be resolved even when one has an infinite number of opportunities to act.
    Keywords: Knowledge, Self-Signalling, Learning
    JEL: C70 D83
    Date: 2008
  6. By: Ariel Rubinstein
    Date: 2008–03–17

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