nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2010‒10‒30
eleven papers chosen by
Matthew Baker
City University of New York

  1. Other-regarding behaviour: Testing guilt- and reciprocity-based models By Tobias Regner; Nicole S. Harth
  2. Neuroeconomics: Constructing Identity By Davis, John B
  3. The Minority of Three-Game: An Experimental and Theoretical Analysis By Thorsten Chmura; Werner Güth; Thomas Pitz; Anthony Ziegelmeyer
  4. Strategic choice of preferences: the persona model By David H. Wolpert; Julian Jamison; David Newth; Michael Harre
  5. A teoria da perspectiva e as mudanças de preferência no mainstream: um prospecto lakatoseano By Pessali, Huascar; Berger, Bruno
  6. Bend It Like Beckham: Ethnic Identity and Integration By Bisin, Alberto; Patacchini, Eleonora; Verdier, Thierry; Zenou, Yves
  7. Local Interactions By ÖZGÜR, Onur
  8. Economic Theory in Historical Perspective By Lefteris Tsoulfidis
  9. A Dynamic Explanation of the Willingness to Pay and Willingness to Accept Disparity By Catherine L. Kling; John A. List; Jinhua Zhao
  10. Gains and Losses: A Common Neural Network for Economic Behaviour By Valeria Faralla; Francesca Benuzzi; Fausta Lui; Patrizia Baraldi; Paolo Nichelli; Nicola Dimitri
  11. Limits on Individual Choice By Eytan Sheshinski

  1. By: Tobias Regner (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Nicole S. Harth (International Graduate College, Friedrich Schiller University, Jena)
    Abstract: Intentions-based models of social preferences use the framework of psychological games and incorporate higher order beliefs and actions into the utility function. We test the robustness of two types of intentions-based models (guilt aversion and reciprocity). In addition to incentivised elicitation of first- and second-order action beliefs, we assess participants' sensitivity to feel guilt, and their attitude towards acting reciprocal. The data confirm the predictions of intentions-based models. Both second-order beliefs and the weighting factor that depends on a participant's sensitivity to guilt/reciprocity are relevant for the decisions taken. Second-order beliefs appear to have an inverse U-shaped effect on the amount returned.
    Keywords: social preferences, other-regarding behaviour, experiments, trust game, guilt aversion, beliefs, psychological game theory, emotions
    JEL: C91 D84
    Date: 2010–10–20
  2. By: Davis, John B (Department of Economics Marquette University)
    Abstract: This paper asks whether neuroeconomics will make instrumental use of neuroscience to adjudicate existing disputes in economics or be more seriously informed by neuroscience in ways that might transform economics. The paper pursues the question by asking how neuroscience constructs an understanding of individuals as whole persons. The body of the paper is devoted to examining two approaches: Don Ross’s neurocellular approach to neuroeconomics and Joseph Dumit’s cultural anthropological science organization approach. The accounts are used to identify boundaries on single individual explanations. With that space Andy Clark’s external scaffolding view and Nathaniel Wilcox’s socially distributed cognition view are employed.
    Keywords: neuroeconomics, behavioral economics, neurocellular economics, collective brainset, external scaffolding, socially distributed cognition, Economics
    JEL: A12 B41
    Date: 2010–09
  3. By: Thorsten Chmura (Department of Economics, University of Munich); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Thomas Pitz (Nottingham University Business School China); Anthony Ziegelmeyer (Max Planck Institute of Economics, Strategic Interaction Group)
    Abstract: We report experimental and theoretical results on the minority of three-game where three players have to choose one of two alternatives independently and the most rewarding alternative is the one chosen by a single player. This coordination game has many asymmetric equilibria in pure strategies that are non strict and payoff-asymmetric, and a unique symmetric mixed strategy equilibrium in which each player's behavior is based on the toss of a fair coin. We show that such a straightforward behavior is predicted by Harsanyi and Selten's (1988) equilibrium selection theory as well as alternative solution concepts like impulse balance equilibrium and sampling equilibrium. Our results indicate that participants rely on various decision rules, and that only a quarter of them decide according to the toss of a fair coin. Reinforcement learning is the most successful decision rule as it describes best the behavior of about a third of our participants.
    Keywords: Coordination, Minority game, Mixed strategy, Learning models, Experiments
    JEL: C72 C91 D83
    Date: 2010–10–19
  4. By: David H. Wolpert; Julian Jamison; David Newth; Michael Harre
    Abstract: We introduce a modification to the two-timescale games studied in the evolution of preferences (EOP) literature. In this modification, the strategic process occurring on the long timescale is learning by an individual across his or her lifetime, not natural selection operating on genomes over multiple generations. This change to the longer timescale removes many of the formal difficulties of EOP models and allows us to show how two-timescale games can provide endogenous explanations for why humans sometimes adopt interdependent preferences and sometimes exhibit logit quantal response functions. In particular, we show that our modification to EOP explains experimental data in the Traveler’s Dilemma. We also use our modification to show how cooperation can arise in nonrepeated versions of the Prisoner’s Dilemma (PD). We then show that our modification to EOP predicts a “crowding out” phenomenon in the PD, in which introducing incentives to cooperate causes players to stop cooperating instead. We also use our modification to predict a tradeoff between the robustness and the benefit of cooperation in the PD.
    Keywords: Game theory
    Date: 2010
  5. By: Pessali, Huascar; Berger, Bruno
    Abstract: For many decades over the 20th Century, the mainstream of economics adopted a normative and axiomatic theory of individual behavior in which maximizing procedures were carried out by rationally unbounded agents. This status has been challenged on many grounds and alternative views from fields like psychology have found a way into the core of economics research frontier. Prospect theory, developed by psychologists Daniel Kahneman and Amos Tversky since the 1970s, has provided a more empirical, inductive and descriptive theory of decision making. It has made significant inroads into mainstream microeconomics, shaking the habits of some of its practitioners. This paper first takes stock of its main developments and then uses a Lakatosian framework to draw out its negative and positive heuristics. In what follows, its heuristics are compared to those of traditional rational decision-making theories. The differences between them are highlighted, pointing to changes in the mainstream of the profession and to new opportunities for research.
    Keywords: decision making; prospect theory; behavioral economics; experimental economics; expected utility theory.
    JEL: B21
    Date: 2010–06–01
  6. By: Bisin, Alberto (New York University); Patacchini, Eleonora (Sapienza University of Rome); Verdier, Thierry (Paris School of Economics); Zenou, Yves (Stockholm University)
    Abstract: We propose a theoretical framework to study the determinants of ethnic and religious identity along two distinct motivational processes which have been proposed in the social sciences: cultural conformity and cultural distinction. Under cultural conformity, ethnic identity is reduced by neighborhood integration, which weakens group loyalties and prejudices. On the contrary, under cultural distinction, ethnic minorities are more motivated in retaining their own distinctive cultural heritage the more integrated are the neighborhoods where they reside and work. Data on ethnic preferences and attitudes provided by the Fourth National Survey of Ethnic Minorities in the UK enables us to test the relative significance of these two identity processes. We find evidence consistent with intense ethnic and religious identity mostly formed as a cultural distinction mechanism. Consistently, we document that ethnic identities are more intense in mixed than in segregated neighborhoods.
    Keywords: ethnicity, identity, intermarriage, cultural transmission
    JEL: A14 J15
    Date: 2010–10
  7. By: ÖZGÜR, Onur
    Abstract: Local interactions refer to social and economic phenomena where individuals' choices are influenced by the choices of others who are `close' to them socially or geographically. This represents a fairly accurate picture of human experience. Furthermore, since local interactions imply particular forms of externalities, their presence typically suggests government action. I survey and discuss existing theoretical work on economies with local interactions and point to areas for further research.
    Keywords: Conformity, externalities, local interactions, Markov perfect equilibrium, multiple equilibria, rational expectations, social interactions, social multiplier, strategic complementarities
    JEL: C31 C33 C62 C72 C73 D9 D62 D50 Z13
    Date: 2010
  8. By: Lefteris Tsoulfidis (Department of Economics, University of Macedonia)
    Abstract: On the methodological plain this paper outlines the conditions that contribute to the development of economic theories and it continues with an examination of the concrete circumstances that gave rise to modern neoclassical macroeconomic theories. The paper further claims that the current impasse in macroeconomics is indicative of the need for new directions in economic theory which becomes imperative in the long economic downturn that started in 2007 and concludes by suggesting the need for a synthesis between the classical analysis and the theory of effective demand.
    Keywords: economic history
    JEL: N10
    Date: 2010–10
  9. By: Catherine L. Kling; John A. List; Jinhua Zhao
    Abstract: Evidence from laboratory experiments suggests that important disparities exist between willingness to pay (WTP) and compensation demanded for the same good. This study advances, and experimentally tests, a new explanation of the WTP/WTA disparity—a dynamic theory based on the presence of commitment costs. We find that the commitment cost theory combined with a simple behavioral anomaly is able to lend insights into the causes and severity of the WTA/WTP disparity. Further, we find that market experience attenuates the behavioral anomaly, consistent with the notion that no value disparity exists for agents with sufficient market experience.
    JEL: C93 Q5 Q51
    Date: 2010–10
  10. By: Valeria Faralla; Francesca Benuzzi; Fausta Lui; Patrizia Baraldi; Paolo Nichelli; Nicola Dimitri
    Abstract: Event-related functional magnetic resonance imaging was used to investigate the neural mechanisms underlying intertemporal preference for symmetric gains and losses in certain conditions, by asking subjects to choose between two gains or two losses available at different points in time. Our data suggest that a common system is activated when an immediate reward/punishment is available, irrespectively of the impulsive /reflective behaviour performed by the individual.
    Keywords: intertemporal preferences; gains; losses; certainty; intertemporal preferences, gains, losses, certainty; sign effect; functional magnetic resonance imaging; decision-making .
    JEL: D87 D90 D91
    Date: 2010–09
  11. By: Eytan Sheshinski
    Abstract: Individuals behave with choice probabilities defined by a multinomial logit (MNL) probability distribution over a finite number of alternatives which includes utilities as parameters. The salient feature of the model is that probabilities depend on the choice-set, or domain. Expanding the choice-set decreases the probabilities of alternatives included in the original set, providing positive probabilities to the added alternatives. The wider probability 'spread' causes some individuals to fur- ther deviate from their higher valued alternatives, while others find the added alternatives highly valuable. For a population with diverse preferences, there ex- ists a subset of alternatives, called the optimum choice-set, which balances these considerations to maximize social welfare. The paper analyses the dependence of the optimum choice-set on a parameter which specifies the precision of individuals' choice ('degree of rationality'). It is proved that for high values of this parame- ter the optimum choice-set includes all alternatives, while for low values it is a singleton. Numerical examples demonstrate that for intermediate values, the size and possible nesting of the optimum choice-sets is complex. Governments have various means (defaults, tax/subsidy) to directly a¤ect choice probabilities. This is modelled by 'probability weight'parameters. The paper analyses the structure of the optimum weights, focusing on the possible exclusion of alternatives. A binary example explores the level of 'type one'and 'type two'errors which justify the imposition of early eligibility for retirement benefits, common to social security systems. Finally, the e¤ects of heterogeneous degrees of rationality among individuals are briefly discussed.
    Date: 2010–06

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