nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2010‒10‒23
twelve papers chosen by
Matthew Baker
City University of New York

  1. In search of an evolutionary edge: trading with a few, more, or many By Stark, Oded; Behrens, Doris A.
  2. The Framing of Games and the Psychology of Play By Martin Dufwenberg; Simon Gaechter; Heike Hennig-Schmidt
  3. Can they beat the Cournot equilibrium? Learning with memory and convergence to equilibria in a Cournot oligopoly By Thomas Vallée; Murat Yildizoglu
  4. Overconfidence and risk dispersion By Heller, Yuval
  5. Condiciones para el fomento de la felicidad pública By Domingo Gallego
  6. Feature-based Choice and Similarity in Normal-form Games: An Experimental Study By Giovanna Devetag; Sibilla Di Guida
  7. Experimental Economics in Transportation: A Focus on Social Influences and the Provision of Information By Gaker, David; Zheng, Yanding; Walker, Joan
  8. Explaining the socio-economic gradient in child outcomes: the intergenerational transmission of cognitive skills By Claire Crawford; Alissa Goodman; Robert Joyce
  9. Is There Selection Bias in Laboratory Experiments? By Blair L. Cleave; Nikos Nikiforakis; Robert Slonim
  10. Favor Trading in Grassroots Fundraising: The Girl Scout Cookie Phenomenon By Sarah Jacobson; Ragan Petrie
  11. Opinion Dynamics and Learning in Social Networks By Daron Acemoglu; Asuman E. Ozdaglar
  12. Awareness and equilibrium By Hill, Brian

  1. By: Stark, Oded; Behrens, Doris A.
    Abstract: Consider a population of farmers who live around a lake. Each farmer engages in trade with his m adjacent neighbors, where m is termed the âspan of interaction.â Trade is governed by a prisonerâs dilemma ârule of engagement.â A farmerâs payoff is the sum of the payoffs from the m prisonerâs dilemma games played with his m/2 neighbors to the left, and with his m/2 neighbors to the right. When a farmer dies, his son takes over. The son who adheres to his fatherâs span of interaction decides whether to cooperate or defect by considering the actions taken and the payoffs received by the most prosperous member of the group comprising his father and his fatherâs m trading partners. Under a conventional structure of payoffs, it is shown that a large span of interaction is detrimental to the long-run coexistence of cooperation and defection, and conditions are provided under which the social outcome associated with the expansion of trade when individuals trade with a few is better than that when they trade with many. Under the stipulated conditions it is shown, by means of a static comparative analysis of the steady state configurations of the farmer population, that an expansion of the market can be beneficial in one context, detrimental in another.
    Keywords: Local interaction, Span of interaction, Imitation, Cooperation, Social welfare, Farm Management, D83, R12, O4,
    Date: 2010–09
  2. By: Martin Dufwenberg (University of Arizona); Simon Gaechter (University of Nottingham); Heike Hennig-Schmidt (University of Bonn)
    Abstract: Psychological game theory can provide rational-choice-based framing effects; frames influence beliefs, beliefs influence motivations. We explain this theoretically and explore empirical relevance experimentally. In a 2?2 design of one-shot public good games we show that frames affect subject’s first- and second-order beliefs, and contributions. From a psychological gametheoretic framework we derive two mutually compatible hypotheses about guilt aversion and reciprocity under which contributions are related to second- and first-order beliefs, respectively. Our results are consistent with either.
    Keywords: framing; psychological game theory; guilt aversion; reciprocity; public good games; voluntary cooperation
    JEL: C91 C72 D64 Z13
    Date: 2010–09
  3. By: Thomas Vallée (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - Université de Nantes : EA4272); Murat Yildizoglu (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579)
    Abstract: This article analyses the possibility of firms learning collusive solutions in a Cournot quantity game. Starting from the results of Vallée and Yildizoglu (2009) and of Alos-Ferrer (2004), we study the role of random experimenting, social learning (imitation), and (updated) memory in helping firms to discover more collusive market configurations than those of the Cournot equilibrium (CE). We show that long memory and its update is necessary to achieve such configurations.
    Keywords: Cournot oligopoly; Learning; Evolution; Selection; Evolutionary stability; Nash Equilibrium; Collusion
    Date: 2010–10–15
  4. By: Heller, Yuval
    Abstract: Experimental evidence suggests that people tend to be overconfident in the sense that they overestimate the accuracy of their own predictions. In this paper we present a simple principal-agent model in which principal's interest in dispersing risk motivates him to hire overconfident agents. We show that the induced overconfidence satisfies experimental stylized facts (such as, hard-easy effect, false certainty effect and underuse of base rates). In addition, we show that overconfidence is a unique stable evolutionary strategy, and that it can Pareto-improve social welfare. Finally, we demonstrate applicability by: 1) demonstrating why CEOs hire overconfident intermediate managers, and 2) explaining why investors prefer overconfident entrepreneurs.
    Keywords: overconfidence; risk dispersion; hard-easy effect; evolutionary stability
    JEL: C72 C73
    Date: 2010–09–26
  5. By: Domingo Gallego (Departamento de Estructura e Historia Económica y Economía Pública. Universidad de Zaragoza (España))
    Abstract: This paper is based on the hypothesis that to feel individually and collectively respected is vital to private and public happiness because, as well as the sensation of comfort that it produces, respect creates a favorable context both for the acquisition of capabilities and for the opportunity to exercise them. All this may be positive for individuals, for those closest to them, for society as a whole and, even, for future societies. The objective of this paper is to identify the conditions that favor this result. Its main proposition is that respect comes from the capacity to make others respect one, so the paper focuses on the analysis of the circumstances that favor this capacity.
    Keywords: Economic development, institutional economy, public economy, evolutionary economics, collective action, social values, public ethics and morality
    JEL: B52 D71 I30 O10
    Date: 2010–10
  6. By: Giovanna Devetag; Sibilla Di Guida
    Abstract: In this paper we test the effect of descriptive "features" on initial strategic behavior in normal form games, where "descriptive" are all those features that can be modified without altering the (Nash) equilibrium structure of a game. We observe that our experimental subjects behave according to some simple heuristics based on descriptive features, and that these heuristics are stable even across strategically different games. This suggests that a categorization of games based on features may be more accurate in predicting agents' initial behavior than the standard categorization based on Nash equilibria, as shown by the analysis of individual behavior. Anaysis of choice patterns and individual response times suggests that non-equilibrium choices may be due to the use of incorrect and simplified mental representations of the game structure, rather than to beliefs in other players' irrationality. Of the four stationary concepts analyzed (Nash equilibrium, QRE, action sampling, and payoff sampling), QRE results the best in fitting the observed data.
    Keywords: normal form games, one-shot games, response times, similarity, categorization, focal points
    JEL: C72 C91 C92
    Date: 2010–10–09
  7. By: Gaker, David; Zheng, Yanding; Walker, Joan
    Abstract: A major aspect of transportation planning is understanding behavior: how to predict it and how to influence it over the long term. Behavioral models in transportation are predominantly rooted in the classic microeconomic paradigm of rationality. However, there is a long history in behavioral economics of raising serious questions about rationality. Behavioral economics has made inroads in transportation in the areas of survey design, prospect theory, and attitudinal variables. Further infusion into transportation could lead to significant benefits in terms of increased ability to both predict and influence behavior. The aim of this research is to investigate the transferability of findings in behavioral economics to transportation, with a focus on lessons regarding personalized information and social influences. We designed and conducted three computer experiments using UC Berkeley students: one on personalized-information and route choice, one on social influences and auto ownership, and one combining information and social influences and pedestrian safety. Our findings suggest high transferability of lessons from behavioral economics and great potential for influencing transport behavior. We found that person- and trip-specific information regarding greenhouse gas emissions has significant potential for increasing sustainable behavior, and we are able to quantify this Value of GREEN at around $0.24/pound of greenhouse gas avoided. Congruent with lessons from behavioral economics, we found that information on peer compliance of pedestrian laws had a stronger influence on pedestrian safety behavior than information on the law, citation rates, or accident statistics. We also found that social influences positively impact the decision to buy a hybrid car over a conventional car or forgo a car altogether.
    Date: 2010–08–01
  8. By: Claire Crawford (Institute for Fiscal Studies); Alissa Goodman (Institute for Fiscal Studies); Robert Joyce (Institute for Fiscal Studies)
    Abstract: <p><p><p>Papers in this volume and elsewhere consistently find a strong relationship between children's cognitive abilities and their parents' socio-economic position (SEP). Most studies seeking to explain the paths through which SEP affects cognitive skills suffer from a potentially serious omitted variables problem, as they are unable to account for an important determinant of children's cognitive abilities, namely parental cognitive ability. A range of econometric strategies have been employed to overcome this issue, but in this paper, we adopt the very simple (but rarely available) route of using data that includes a range of typically unobserved characteristics, such as parental cognitive ability and social skills. In line with previous work on the intergenerational transmission of cognitive skills, we find that parental cognitive ability is a significant predictor of children's cognitive ability; moreover, it explains one sixth of the socio-economic gap in those skills, even after controlling for a rich set of demographic, attitudinal and behavioural factors. Despite the importance of parental cognitive ability in explaining children's cognitive ability, however, the addition of such typically unobserved characteristics does not alter our impression of the relative importance of other factors in explaining the socio-economic gap in cognitive skills. This is reassuring for studies that are unable to control for parental cognitive ability.</p></p></p>
    Date: 2010–09
  9. By: Blair L. Cleave; Nikos Nikiforakis; Robert Slonim
    Abstract: Do the social and risk preferences of participants in laboratory experiments represent the preferences of the population from which they are recruited? To answer this question, we conducted a classroom experiment with a population of 1,173 students using a trust game and a lottery choice task to measure individual preferences. Separately, all 1,173 students were invited to participate in a laboratory experiment. To determine whether selection bias exists, we compare the preferences of the individuals who eventually participated in a laboratory experiment to those in the population. We find that the social and risk preferences of the students participating in the laboratory experiment are not significantly different from the preferences of the population from which they were recruited. We further show that participation decisions across most subgroups (e.g., men vs. women) do not differ significantly. We therefore fail to find selection bias based on social and risk preferences.
    Keywords: selection bias; laboratory experiments; external validity; social preferences; risk preferences
    JEL: C90
    Date: 2010
  10. By: Sarah Jacobson (Williams College); Ragan Petrie (George Mason University)
    Abstract: Grassroots fundraising leverages favor trading within social networks to support the provision of a public good. We use a laboratory experiment to study the elements and dynamics of this type of fundraising institution. Peer-to-peer reciprocity is an important component of grassroots fundraising, and the ability to practice this targeted reciprocity in our experiment increases contributions to the public good by 14%. Subjects discriminate by rewarding group members who have been generous and withholding rewards from ungenerous group members. At least some of this reciprocal behavior is rooted in other-regarding preferences. When someone is rendered unable to benefit from favor trading, he gives much less to the public good than he does in other settings. People thus excluded from the "circle of reciprocity" thus provide a clean and strict test of indirect reciprocity, since they cannot benefit from a norm of cooperation. We do not observe indirect reciprocity.
    Keywords: public goods, reciprocity, experiment, peer-to-peer fundraising
    JEL: C91 H41 D01
    Date: 2010–10
  11. By: Daron Acemoglu; Asuman E. Ozdaglar
    Date: 2010–10–08
  12. By: Hill, Brian
    Abstract: There has been a recent surge of interest among economists in developing models of doxastic states that can account for some aspects of human cognitive limitations that are ignored by standard formal models, such as awareness. Epistemologists purport to have a principled reason for ignoring the question of awareness: under the equilibrium conception of doxastic states they favour, a doxastic state comprises the doxastic commitments an agent would recognise were he fully aware, so the question of awareness plays no role. The objective of this paper is to scrutinize this argument.
    Keywords: Bounded rationality; awareness; doxastic states; cognitive equilibrium; belief change; formal epistemology.
    JEL: I10
    Date: 2010–08–21

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