nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2009‒07‒11
six papers chosen by
Matthew Baker
City University of New York

  1. Trust, Introspection, and Market Participation: an Evolutionary Approach By Adriani, Fabrizio; Sonderegger, Silvia
  2. A multiplicity of approaches to institutional analysis. Applications to the government and the arts By Bruno S. Frey
  3. Social Norms, Information and Trust among Strangers: Theory and Evidence By John Duffy; Huan Xie; Yong-Ju Lee
  4. Forms, importance and working of social institutions By Martti Vihanto
  5. An Algorithm for the Simulation of Bounded Rational Agents By Schuster, Stephan
  6. Why do parents socialize their children to behave pro-socially? An information-based theory By Adriani, Fabrizio; Sonderegger, Silvia

  1. By: Adriani, Fabrizio; Sonderegger, Silvia
    Abstract: We build a model where introspection matters - i.e., people rationally form expectations about others using the lens of their own attitudes. Since trustworthy individuals are more "optimistic" about people than opportunists, they are less afraid to engage in market-based exchanges, where they may be vulnerable to opportunistic behavior. Within this context, we use an indirect evolutionary approach to endogenize preferences for trustworthiness. In some cases, the material rewards from greater market participation may outweigh the material disadvantages from foregoing lucrative expropriation opportunities. This implies that trustworthiness may be evolutionary stable in the long-term. Although stricter enforcement (that limits the scope for opportunistic behavior) does in some cases favor preferences for trustworthy behavior (crowding in) we show that the opposite (crowding out) may also occur. Our findings are consistent with recent empirical evidence.
    Keywords: Endogenous Preferences; Trust; Introspection; Institutions; Enforcement; Crowding Out
    JEL: D81 D02 Z13 D82 C73
    Date: 2009–07
  2. By: Bruno S. Frey
    Abstract: Four types of “economics” relevant for institutional analysis are distinguished: Standard Neoclassical Economics; Socio-Economics or Social Economics; New Institutional Economics; and Psychological Economics (often misleadingly called Behavioural Economics). The paper argues that an extension of Neoclassical Economics with elements from other social sciences (including political science, sociology, psychology, law and anthropology) is fruitful to explain institutions because it allows us to maintain the strength of that approach. Social Economics can play an important role helping to overcome the limitations of Neoclassics. However, it should become more concrete, integrate what is useful in Neoclassics, and should seriously engage in empirical research.
    Keywords: Institutional Economics, Neoclassics, Psychological Economics, Behavioural Economics, institutions.
    JEL: Z11 H77 P16
    Date: 2009–06
  3. By: John Duffy; Huan Xie; Yong-Ju Lee
    Abstract: How do norms of trust and reciprocity arise? We investigate this question by examining behavior in an experiment where subjects play a series of indefinitely repeated trust games. Players are randomly and anonymously matched each period. The parameters of the game are chosen so as to support trust and reciprocity as a sequential equilibrium when no reputational information is available. The main questions addressed are whether a social norm of trust and reciprocity emerges under the most extreme information restriction (community-wide enforcement) or whether trust and reciprocity require additional, individual-specific information about a player’s past history of play and how long that history must be. In the absence of such reputational information, we find that a social norm of trust and reciprocity is difficult to sustain. The provision of reputational information on past individual decisions significantly increases trust and reciprocity, with longer histories yielding the best outcomes. Importantly, we find that making reputational information available at a small cost may also lead to a significant improvement in trust and reciprocity, despite the fact that most subjects do not choose to purchase this information.
    JEL: C72 C91 C92
    Date: 2009–07
  4. By: Martti Vihanto (Department of Economics, Turku School of Economics)
    Abstract: Social institutions are persistent regularities in contracting and other relations amongst men and in the unintended consequences of such rule-like behavior. They include morality and law as well as institutions of governance such as branding and advertising. Institutions are studied in all approaches and schools of economics, and each involves its peculiar emphases. The purpose of the paper is to give an overview of the forms, importance and working of social institutions by taking examples from decision making of consumers. Use is made in particular of the findings of transaction-cost, evolutionary and behavioral economics. The paper is part of a Finnish open access textbook Principles of Institutional Economics in progress (
    Keywords: social institutions, institutional economics, transaction costs, heuristic behavior
    JEL: B52 D11 D02
    Date: 2009–05
  5. By: Schuster, Stephan
    Abstract: Non-classical models of economic behaviour, usually summarised under the notion of 'Bounded Rationality' criticise the assumptions of the standard economic model - hyperrationality, perfect and costless information, and unlimited mental processing capabilities. However, alternative approaches have either remained very simple or purely descriptive. Here, a computational approach is presented based on Simon's concept of bounded rationality and satisficing as a compromise between the oversimplification of analytical and the descriptiveness of rich cognitive models.
    Keywords: agent based modelling; bounded rationality; reinforcement learning; rule extraction
    JEL: C63 D83
    Date: 2009–06–27
  6. By: Adriani, Fabrizio; Sonderegger, Silvia
    Abstract: We present a model of intergenerational transmission of pro-social values in which parents have information about relevant characteristics of society that is not directly available to their children. Differently from existing models of cultural transmission of values (such as Bisin and Verdier, 2001, and Tabellini, 2008) we assume that parents are exclusively concerned with their children's material welfare. If parents coordinate their educational choices, a child would look at her system of values to predict the values of her contemporaries, with whom she may interact. A parent may thus choose to instil pro-social values into his child in order to signal to her that others can generally be trusted. This implies that parents may optimally decide to endow their children with values that stand in contrast with maximization of material welfare, even if their children's material welfare is all they care about.
    Keywords: Intergenerational Transmission; Signaling; Values
    JEL: H41 D64 D82 Z13
    Date: 2009–02

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