nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2010‒09‒18
twelve papers chosen by
Matthew Baker
City University of New York

  1. Group Membership, Competition, and Altruistic versus Antisocial Punishment: Evidence from Randomly Assigned Army Groups By Lorenz Goette; David Huffman; Stephan Meier; Matthias Sutter
  2. A class of evolutionary models for participation games with negative feedback By Pietro Dindo; Jan Tuinstra
  3. The emergence of reciprocally beneficial cooperation By Sergio Beraldo; Robert Sugden
  4. Cultural Formation of Preferences and Assimilation of Cultural Groups By Michael M. Pichler
  5. Elementos para uma Teoria da Firma Dinâmica. By Sérgio Fornazier Meirelles Filho; Paula Andréa Marques do Valle; Dnilson Carlos Dias
  6. The Origins of Savings Behavior By Cronqvist, Henrik; Siegel, Stephan
  7. Thinking in Chinese vs. Thinking in English: Social Preference and Risk Attitudes of Multicultural Minds By Li King King
  8. Are large complex economic systems unstable ? By Sitabhra Sinha
  9. Influential Listeners: An Experiment on Persuasion Bias in Social Networks By Luca Corazzini; Filippo Pavesi; Beatrice Petrovich; Luca Stanca
  10. Nature or Nurture: What Determines Investor Behavior? By Barnea, Amir; Cronqvist, Henrik; Siegel, Stephan
  11. On Negative Time Preference By M. Casari; D. Dragone
  12. On the Emergence and Evolution of Mark-up Middlemen: An Inframarginal Model By Chun Pang; He-ling Shi

  1. By: Lorenz Goette; David Huffman; Stephan Meier; Matthias Sutter
    Abstract: We investigate how group boundaries, and the economic environment surrounding groups, affect altruistic cooperation and punishment behavior. Our study uses experiments conducted with 525 officers in the Swiss Army, and exploits random assignment to platoons. We find that, without competition between groups, individuals are more prone to cooperate altruistically in a prisoner's dilemma game with in-group as opposed to out-group members. They also use a costly punishment option to selectively harm those who defect, encouraging a norm of cooperation towards the group. Adding competition between groups causes even stronger in-group cooperation, but also a qualitative change in punishment: punishment becomes anti-social, harming cooperative and defecting out-group members alike. These findings support recent evolutionary models and have important organizational implications.
    Keywords: Cooperation, Punishment, Army, Experiment
    JEL: C72 C91
    Date: 2010–09
  2. By: Pietro Dindo; Jan Tuinstra
    Abstract: We introduce a framework to analyze the interaction of boundedly rational heterogeneous agents repeatedly playing a participation game with negative feedback. We assume that agents use different behavioral rules prescribing how to play the game conditionally on the outcome of previous rounds. We update the fraction of the population using each rule by means of a general class of evolutionary dynamics based on imitation, which contains both replicator and logit dynamics. Our model is analyzed by a combination of formal analysis and numerical simulations and is able to replicate results from the experimental and computational literature on these types of games. In particular, irrespective of the specific evolutionary dynamics and of the exact behavioral rules used, the dynamics of the aggregate participation rate is consistent with the symmetric mixed strategy Nash equilibrium, whereas individual behavior clearly departs from it. Moreover, as the number of players or speed of adjustment increase the evolutionary dynamics typically becomes unstable and leads to endogenous fluctuations around the steady state. These fluctuations are robust with respect to behavioral rules that try to exploit them.
    Keywords: Participation games, Heterogeneous behavioral rules, Revision protocol, Replicator Dynamics Logit Dynamics, Nonlinear dynamics
    JEL: C72 C73
    Date: 2010–09–02
  3. By: Sergio Beraldo; Robert Sugden
    Abstract: This paper offers a new and robust model of the emergence and persistence of cooperation. In the model, interactions are anonymous, the population is well-mixed, and the evolutionary process selects strategies according to material payoffs. The cooperation problem is modelled as a game similar to Prisoner’s Dilemma, but there is an outside option of nonparticipation and the payoff to mutual cooperation is stochastic; with positive probability, this payoff exceeds that from cheating against a cooperator. Under mild conditions, mutually beneficial cooperation occurs in equilibrium. This is possible because the non-participation option holds down the equilibrium frequency of cheating.
    Keywords: Cooperation; voluntary participation; random payoffs.
    JEL: C73
    Date: 2010–07
  4. By: Michael M. Pichler (Institute of Mathematical Economics, Bielefeld University)
    Abstract: Based on the cultural formation of continuous preferences framework of Pichler (IMW Working Paper No. 431, 2010), this paper analyzes the evolution of preferences and behavior in a two cultural groups setting. We show that the qualitative dynamic properties depend crucially on what parents perceive as the optimal preferences for their children to adopt. Under inter– generationally fixed optimal preferences, the preferences of the cultural groups will always stay distinct. If the optimal preferences coincide with those derived from the representative group behavior, then a multitude of convergence path types can realize. These contain both an inter–generational assimilation process toward the same preference point, as well as inter–generational dissimilation.
    Keywords: Continuous Preferences, Assimilation, Cultural Groups, Endogenous Preferences, Preference Evolution, Socialization
    JEL: C72 J13 Z13
    Date: 2010–08
  5. By: Sérgio Fornazier Meirelles Filho (FACE-UFG, Ciências Econômicas); Paula Andréa Marques do Valle (FACE-UFG, Ciências Econômicas); Dnilson Carlos Dias (FACE-UFG, Ciências Econômicas)
    Abstract: This paper aims to suggest elements for a dynamic theory of the firm as a more realistic name, as opposed to the proposal by neoclassical theory. It counts itself as the genesis of temporality recognition of economic activity and a redefinition of the firm. The preliminary concepts about time, uncertainty and bounded rationality of economic agents are crucial. Otherwise, the concept of firm in different approaches, emphasizes the main point of reference work in evolutionary ideas as a more appropriate view of the firm in order to grasp its nature is essentially dynamic. Thus, the ability to innovate is considered here as the key driver of this dynamic, in a theoretical framework to abandon the benchmark equilibrium. To have such innovative capacity, the firm is conceived primarily as a repository of knowledge, as a set of resources, tangible and intangible assets that define a range of capabilities and present, mechanisms by which it acquires new powers and abilities.
    Keywords: Firm, Evolutionary Theory, Neoclassical Theory.
    Date: 2010–08
  6. By: Cronqvist, Henrik (Claremont McKenna College); Siegel, Stephan (University of Washington)
    Abstract: What are the origins of individual savings behavior? Using data on identical and fraternal twins matched with data on their savings behavior, we find that an individual's savings propensity is governed by both genetic predispositions, social transmission from parents to their children, and gene-environment interplay where certain environments moderate genetic influences. Genetic variation explains about 35 percent of the variation in savings rates across individuals, and this genetic effect is stronger in less constraining, high socioeconomic status environments. Parent-child transmission influences savings for young individuals and those who grew up in a family environment with less competition for parental resources. Individual-specific life experiences is a very important explanation for behavior in the savings domain, and strongest in urban communities. In a world progressing rapidly towards individual retirement savings autonomy, understanding the origins of individuals' savings behavior are of key importance to economists as well as policy makers.
    Keywords: Savings; Consumption; Behavioral Genetics
    JEL: D10 D31 G11
    Date: 2010–09–15
  7. By: Li King King (Strategic Interaction Group, Max Planck Institute of Economics, Jena)
    Abstract: This paper investigates whether language priming activates different cultural identities and norms associated with the language communicated; bilingual subjects are given Chinese instructions in the Chinese treatment and English instructions in the English treatment. The main findings are: (1) in social preference games involving strategic interactions, e.g., the trust game, subjects in the Chinese treatment are more trusting and trustworthy than in the English treatment. However, (2) in individual choice games about social preference, such as the dictator game, while there is no treatment difference, subjects exhibit in-group favoritism only in the Chinese treatment. Further, (3) subjects in the Chinese treatment expect others to be more risk seeking, and prefer to pick Chinese lucky numbers in a lottery game. These findings support the hypothesis that languages are associated with cultural frames and that communicating in a particular language increases the cognitive accessibility of norms associated with that language.
    Keywords: Identity, cross-cultural differences, language, bilingual, biculture, social preference, risk attitudes
    JEL: C91 D81 Z10
    Date: 2010–09–13
  8. By: Sitabhra Sinha
    Abstract: Although classical economic theory is based on the concept of stable equilibrium, real economic systems appear to be always out of equilibrium. Indeed, they share many of the dynamical features of other complex systems, e.g., ecological food-webs. We focus on the relation between increasing complexity of the economic network and its stability with respect to small perturbations in the dynamical variables associated with the constituent nodes. Inherent delays and multiple time-scales suggest that economic systems will be more likely to exhibit instabilities as their complexity is increased even though the speed at which transactions are conducted has increased many-fold through technological developments. Analogous to the birth of nonlinear dynamics from Poincare's work on the question of whether the solar system is stable, we suggest that similar theoretical developments may arise from efforts by econophysicists to understand the mechanisms by which instabilities arise in the economy.
    Date: 2010–09
  9. By: Luca Corazzini; Filippo Pavesi; Beatrice Petrovich; Luca Stanca
    Abstract: This paper presents an experimental investigation of persuasion bias, a form of bounded rationality whereby agents communicating through a social network are unable to account for possible repetitions in the information they receive. The results indicate that network structure plays a significant role in determining social influence. How- ever, the most influential agents are not those with more outgoing links, as predicted by the persuasion bias hypothesis, but those with more incoming links. We show that a boundedly rational updating rule that takes into account not only agents' outdegree, but also their inde- gree, provides a better explanation of the experimental data. In this framework, consensus beliefs tend to be swayed towards the opinions of influential listeners. We then present an effort-weighted updating model as a more general characterization of information aggregation in social networks.
    Date: 2010–08
  10. By: Barnea, Amir (Claremont McKenna College); Cronqvist, Henrik (Claremont McKenna College); Siegel, Stephan (University of Washington)
    Abstract: Using data on identical and fraternal twins' complete financial portfolios, we decompose the crosssectional variation in investor behavior. We find that a genetic factor explains about one third of the variance in stock market participation and asset allocation. Family environment has an effect on the behavior of young individuals, but this effect is not long-lasting and disappears as an individual gains experiences. Frequent contact among twins results in similar investment behavior beyond a genetic factor. Twins who grew up in different environments still display similar investment behavior. Our interpretation of a genetic component of the decision to invest in the stock market is that there are innate differences in factors affecting effective stock market participation costs. We attribute the genetic component of asset allocation - the relative amount invested in equities and the portfolio volatility - to genetic variation in risk preferences.
    Keywords: Portfolio choice; Investor heterogeneity; Behavioral genetics
    JEL: D10 G11
    Date: 2010–09–15
  11. By: M. Casari; D. Dragone
    Abstract: Survey data show that subjects positively discount both gains and losses but discount gains more heavily than losses. This holds for monetary and non-monetary outcomes
    JEL: C91 D90
    Date: 2010–08
  12. By: Chun Pang; He-ling Shi
    Abstract: This paper is aimed to provide an economic interpretation on the emergence and evolution of the specialised middlemen whose duty is to facilitate the transactions of goods and services in an economy. In a general equilibrium framework, the emergence and evolution of the specialised middlemen conforms to Adam Smith’s insight of deepening specialisation and the division of labour with the improvement in institutions and/or transaction technologies. Consequently, the emergence and the growth of the intermediation sector in both absolute and relative terms, the expansion of the network which provides transaction services, the evolution of market structure from autarky towards division of labour, the improvement in productivity, the reduction in wholesaling-retailing price dispersion, will be realised in concurrency
    Keywords: middlemen, transaction efficiency, inframarginal economics
    JEL: L14 M21 O43
    Date: 2010–05

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