nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2009‒02‒07
four papers chosen by
Matthew Baker
City University of New York

  1. On an Evolutionary Foundation of Neuroeconomics By Schipper, Burkhard
  2. Persistent ideologies in an evolutionary setting By Lars P. Koch
  3. Foundations of Intrinsic Habit Formation By Rozen, Kareen
  4. Consumer behaviour: evolution of preferences and the search for novelty By Garcia-Torres, Abraham

  1. By: Schipper, Burkhard (U of California, Davis)
    Abstract: Neuroeconomics focuses on brain imaging studies mapping neural responses to choice behavior. Economic theory is concerned with choice behavior but it is silent on neural activities. We present a game theoretic model in which players are endowed with an additional structure--a simple 'nervous system'--and interact repeatedly in changing games. The nervous system constrains information processing functions and behavioral functions. By reinterpreting results from evolutionary game theory (Germano, 2007), we suggest that nervous systems can develop to 'function well' in exogenously changing strategic environments. We present an example indicating that an analogous conclusion fails if players can influence endogenously their environment.
    JEL: C72
    Date: 2008–04
  2. By: Lars P. Koch (Institute of Mathematical Economics, Bielefeld University)
    Abstract: We analyse finite two player games in which agents maximize given arbitrary private payoffs which we call ideologies. We define an equilibrium concept and prove existence. Based on this setup, a monotone evolutionary dynamic governs the distribution of ideologies within the population. For any finite 2 player normal form game we show that there is an open set of ideologies being not equivalent to the objective payoffs that is not selected against by evolutionary monotonic dynamics. If the game has a strict equilibrium set, we show stability of non-equivalent ideologies. We illustrate these results for generic 2 x 2-games.
    Keywords: dynamic stability, evolution of preferences, imitation dynamics
    JEL: C72 C73 D82
    Date: 2008–10
  3. By: Rozen, Kareen (Yale U)
    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.
    JEL: C60
    Date: 2008–03
  4. By: Garcia-Torres, Abraham (UNU-MERIT, Maastricht University)
    Abstract: Evolution of consumers' preferences has been recognized by many scholars as being key to understanding technological change. However, mainstream economics cannot account for the seemingly irrational behavior of consumers based on changes in taste – consumer theory lacks exibility and accuracy to explain changes in consumer behavior. Adopting a behavioral psychology perspective, this paper argues that there is a rational pattern in the change of consumers' tastes. I argue that behavioral psychology offers us a unique perspective to solve some of the paradoxes of consumer behavior. This paper incorporates exibility into CES utility function to more adequately account for, and differentiate between, habit formation routines. A model is developed in which habit formation and consumption of new goods are interrelated.
    Keywords: Consumer behaviour, Consumer choice, Technological change, Innovations
    JEL: D11 D12 D91 O31
    Date: 2009

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