nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2008‒10‒21
three papers chosen by
Matthew Baker
City University of New York

  1. Ashamed to be Selfish By David Dillenberger; Philipp Sadowski
  2. Preferences for One-Shot Resolution of Uncertainty and Allais-Type Behavior By David Dillenberger
  3. The Evolution of Time Preference with Aggregate Uncertainty By Arthur Robson; Larry Samuelson

  1. By: David Dillenberger (Department of Economics, University of Pennsylvania); Philipp Sadowski (Department of Economics, Duke University)
    Abstract: We study a two-stage choice problem, where alternatives are allocations between the decision maker (DM) and a passive recipient. The recipient observes choice behavior in stage two, while stage one choice is unobserved. Choosing selfishly in stage two, in the face of a fairer available alternative, may inflict shame on DM. DM has preferences over sets of alternatives that represent period two choices. We axiomatize a representation that identifies DM’s selfish ranking, her norm of fairness and shame. Altruism is the most prominent motive that can explain non-selfish choice. We identify a condition under which shame to be selfish can mimic altruism, when only stage-two choice is observed by the experimenter. An additional condition implies that the norm of fairness can be characterized as the Nash solution of a bargaining game induced by the second-stage choice problem. The representation is generalized to allow for finitely many recipients and applied to a simple strategic situation, a game of trust.
    Keywords: selfishness, fairness, shame, altruism
    JEL: C78 D63 D64 D80 D81
    Date: 2008–10–10
  2. By: David Dillenberger (Department of Economics, University of Pennsylvania)
    Abstract: We study a decision maker (DM) who has recursive preferences over compound lotteries and who cares about the way uncertainty is resolved over time. DM has preferences for one-shot resolution of uncertainty (PORU) if he always prefers any compound lottery to be resolved in a single stage. We establish an equivalence between dynamic PORU and static preferences that are identified with the behavior observed in Allais-type experiments. We define the gradual resolution premium and demonstrate its magnifying effect when combined with the usual risk premium. In an intertemporal context, PORU capture "loss aversion with narrow framing".
    Keywords: recursive preferences over compound lotteries, resolution of uncertainty, Allais paradox, narrow framing, negative certainty independence.
    JEL: D80 D81
    Date: 2008–10–10
  3. By: Arthur Robson (Dept. of Economics, Simon Fraser University); Larry Samuelson (Cowles Foundation, Yale University)
    Abstract: We examine the evolutionary foundations of intertemporal preferences. When all the risk affecting survival and reproduction is idiosyncratic, evolution selects for agents who maximize the discounted sum of expected utility, discounting at the sum of the population growth rate and the mortality rate. Aggregate uncertainty concerning survival rates leads to discount rates that exceed the sum of population growth rate and death rate, and can push agents away from exponential discounting.
    Keywords: Discounting, Evolution, Present bias, Time preference
    JEL: D1 D9
    Date: 2008–10

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