nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2010‒12‒18
thirteen papers chosen by
Matthew Baker
City University of New York

  1. Behavioral Economics By Berg, Nathan
  2. Evolutionary Stability, Co-operation and Hamilton’s Rule By Ingela Alger; Jörgen W. Weibull
  3. The Behavioural Consequences of Unfair Punishment By Michalis Drouvelis
  4. Social learning increases the acceptance and the efficiency of punishment institutions in social dilemmas By Gürerk, Özgür
  5. As-if behavioral economics: Neoclassical economics in disguise? By Berg, Nathan; Gigerenzer, Gerd
  6. The creation of internet communities: A brief history of on-line distribution of working papers through NEP, 1998-2010 By Batiz-Lazo, Bernardo; Krichel, Thomas
  7. A Paradox of Environmental Awareness Campaigns By Koulovatianos, Christos
  8. Decision Utility Theory: Back to von Neumann, Morgenstern, and Markowitz By Kontek, Krzysztof
  9. What is the Nature and Social Norm within the Context of In-Group Favouritism? By Harris, D.; Herrmann, B.; Kontoleon, A.
  10. Why Imitate, and if so, How? Exploring a Model of Social Evolution By K. Schlag
  11. Equilibrium notions and framing effects By Christian Hilbe
  12. Write your paper now: Procrastination, conscientiousness and welfare By Hendrik van Broekhuizen
  13. Optimal Aging and Death By Carl-Johan Dalgaard; Holger Strulik

  1. By: Berg, Nathan
    Abstract: This article describes the emerging subfield known as behavioral economics, which borrows from psychology, empirically tests assumptions used elsewhere in economics, and provides theories that aim to be more realistic and closely tied to experimental and field data. Highlights from the experimental findings of behavioral economics are discussed. The article remarks critically on the role of empirical realism and continued use of as-if methodology in behavioral economics. Problems in normative behavioral economics are given special attention as debates arise concerning how to interpret empirical findings that contradict standard definitions of axiomatic rationality. Ecological rationality, methodological pluralism, and Simon's notion of bounded rationality are considered.
    Keywords: bounded rationality; ecological rationality; Herbert Simon; as-if; survey
    Date: 2010
  2. By: Ingela Alger (Department of Economics, Carleton University); Jörgen W. Weibull (Department of Economics, Stockholm School of Economics)
    Abstract: We extend the domain of evolutionary stability from strategies in symmetric two- player games played in asexually reproducing in?nite populations under uniform ran- dom matching to abstract heritable traits in symmetric pairwise interactions in ?nite or in?nite populations under more general random matching schemes, including inter- actions between relatives in sexually reproducing populations. We examine in detail interactions where the traits are ?behavioral inclinations? that may be more or less altruistic or spiteful. By a behavioral inclination we mean a rule that speci?es what strategy to use, depending on the nature of the interaction at hand and on the strategy used by the other individual (which, in turn, depends on that individual?s behavioral inclination). We show that evolutionary stability of such behavioral inclinations agrees with Hamilton?s rule at the abstract level of behavioral inclinations but not always at the level of strategies. In particular, in social dilemmas with decreasing returns to scale in the production of a public good, there is less (more) co-operation than predicted by Hamilton?s rule, as applied directly to strategies, if contributions are substitutes (complements).
    JEL: C73 D64
    Date: 2010–12–03
  3. By: Michalis Drouvelis
    Abstract: Experimental evidence from public good games with punishment suggests that punishment works when subjects assign it fairly by sanctioning non-cooperators. This paper reports an experiment in which punishment is assigned unfairly in the sense that it is not linked to individual behaviour and is melted out to all group members (irrespective of their prior behaviour). We test whether unfair punishment generates different contribution and punishment behaviour relative to the standard punishment game. Our findings suggest different dynamics of average contributions in the presence of unfair punishment relative to the standard punishment game. Contribution levels are significantly different only when subjects have obtained experience from both games. We also find that, although the assignment of punishment is unaffected after the experience of an environment with unfair punishment, a history of unfair punishment makes a difference regarding reactions to alleviation, reward and punishment received.
    Keywords: Recriprocity, Unfair punishment, Public good experiments
    JEL: C92 H41
    Date: 2010–11
  4. By: Gürerk, Özgür
    Abstract: Endogenously chosen punishment institutions perform well in increasing contributions and long-term payoffs in social dilemma situations. However, they suffer from (a) initial reluctance of subjects to join the punishment institution and (b) initial efficiency losses due to frequent punishment. Here, we investigate the effects of social learning on the acceptence and the efficiency of a peer punishment institution in a community choice experiment. Subjects choose between communities with and without the possibility to punish peers before interacting in a repeated social dilemma situation. We find that providing participants with a social history - presenting the main results of an identical previous experiment conducted with dierent subjects - decreases the initial reluctance towards the punishment institution signicantly. Moreover, with social history, cooperative groups reach the social optimum more rapidly and there is lower efficiency loss due to reduced punishment. Our findings shed light on the importance of social learning for the acceptance of seemingly unpopular but socially desirable mechanisms.
    Keywords: Social dilemmas; Social history; Social learning; Community choice; Punishment; Institution choice
    JEL: C92 H41
    Date: 2010–11
  5. By: Berg, Nathan; Gigerenzer, Gerd
    Abstract: For a research program that counts improved empirical realism among its primary goals, it is surprising that behavioral economics appears indistinguishable from neoclassical economics in its reliance on “as-if” arguments. “As-if” arguments are frequently put forward in behavioral economics to justify “psychological” models that add new parameters to fit decision outcome data rather than specifying more realistic or empirically supported psychological processes that genuinely explain these data. Another striking similarity is that both behavioral and neoclassical research programs refer to a common set of axiomatic norms without subjecting them to empirical investigation. Notably missing is investigation of whether people who deviate from axiomatic rationality face economically significant losses. Despite producing prolific documentation of deviations from neoclassical norms, behavioral economics has produced almost no evidence that deviations are correlated with lower earnings, lower happiness, impaired health, inaccurate beliefs, or shorter lives. We argue for an alternative non-axiomatic approach to normative analysis focused on veridical descriptions of decision process and a matching principle – between behavioral strategies and the environments in which they are used – referred to as ecological rationality. To make behavioral economics, or psychology and economics, a more rigorously empirical science will require less effort spent extending “as-if” utility theory to account for biases and deviations, and substantially more careful observation of successful decision makers in their respective domains.
    Keywords: bounded rationality; ecological rationality; as-if; fit; prediction; decision; process
    JEL: B1 B4
    Date: 2010
  6. By: Batiz-Lazo, Bernardo; Krichel, Thomas
    Abstract: This paper adds to the growing literature on the formation of online communities from an historical perspective by telling of the emergence and development of a service for speedy, online distribution of recent additions to the broad literatures on economics and related areas called NEP: New Economics Papers as well as the online community that grew around it. We provide details of the social and technological challenges for its construction as well as the evolution of its governance. The development of NEP provides an illustrative example for the kind of new business models that have emerged as the Internet has been used by creative minds to provide existing services in a new way.
    Keywords: digital libraries; online communities; open source; New Economic Papers (NEP); RePEc
    JEL: N8 A31 L63
    Date: 2010–11
  7. By: Koulovatianos, Christos
    Abstract: We build a workable game of common-property resource extraction under rational Bayesian learning about the renewal prospects of a resource. We uncover the impact of exogenously shifting the prior beliefs of each player on the response functions of others. What we find about the role of environmental conservation campaigns is paradoxical. To the extent that such campaigns instill overly high pessimism about the potential of natural resources to reproduce, they create anti-conservation incentives: anyone having exploitation rights becomes inclined to consume more of the resource earlier, before others overexploit, and before the resource's stock is reduced to lower levels.
    Keywords: renewable resources; resource exploitation; non-cooperative dynamic games; Bayesian learning; stochastic games; commons; rational learning; uncertainty; beliefs
    JEL: Q50 O13 D84 D83 Q20 C72 O12 L70 C73
    Date: 2010–11–12
  8. By: Kontek, Krzysztof
    Abstract: Prospect Theory (1979) and its Cumulative version (1992) argue for probability weighting to explain lottery choices. Decision Utility Theory presents an alternative solution, which makes no use of this concept. The new theory distinguishes decision and perception utility, postulates a double S-shaped decision utility curve similar to one hypothesized by Markowitz (1952), and applies the expected decision utility value similarly to the theory by von Neumann and Morgenstern (1944). Decision Utility Theory proposes straightforward risk measures, presents a simple explanation of risk attitudes by using the aspiration level concept, and predicts that people might not consider probabilities and outcomes jointly, on the contrary to the expected utility paradigm.
    Keywords: Expected Utility Theory; Markowitz Hypothesis; Prospect Theory; Decision Utility; Allais Paradox; Common Ratio Effect; Risk Attitude Measures; Aspiration Level.
    JEL: D81 C91
    Date: 2010–12–01
  9. By: Harris, D.; Herrmann, B.; Kontoleon, A.
    Abstract: In-group favouritism behaviour is observed everywhere around the world and previous research has shown that this behaviour is also easily triggered in a laboratory in various contexts. However, little is known about why different magnitudes of in-group favouritism are observed across societies. In this paper, we use a new allocation experiment to examine the nature of social norms within the context of in-group favouritism behaviour. In this experiment, a decision-maker has to decide only once how to allocate a fixed amount of resource between each of the three members of her own group and each of the three members of the out-group, whilst the decision- maker's own payo is not aected by her decision. Three treatments are implemented: in the first treatment, only the members of the in-group can punish the decision-maker. In the second treatment, only the members of the out-group can punish the decision-maker. Finally, in the third treatment, only an independent third-party observer can punish the decision-maker. The aim of these treatments is to test whether there is a prevailing social norm which dominates the behavioural standard within the context of in-group favouritism and whether this mechanism varies across dierent subject pools, namely Thailand and the UK.<br><br> Compared to a baseline treatment with no punishment opportunity, we observed that among the Thai subjects in-group favouritism significantly increased once the in-group members were given the opportunity to punish the decision-maker. The threat of punishment from a third-party punisher also increased in-group favouritism in Thailand. However, when only the out-group members had the opportunity to punish, no change in in-group favouritism behaviour was observed. On the contrary, within the British subject pool, when the out-group members had the opportunity to punish the decision-maker, we observed a decline in in-group favouritism as well as a marked shift towards an equitable outcome. The threats of punishments from the in-group members and the third-party, on the other hand, did not have any impact on in-group favouritism behaviour in the UK. The results suggest that within the Thai subject pool, there appears to be a prevailing `in-group bias norm' which is strongly enforced within and outside the group. Within the UK subject pool, however, it is less clear what the prevailing norm is. Whilst the threat of punishment from the out-group members who directly lose out from favouritism behaviour appeared to significantly reduce this behaviour, an uninvolved third-party was not willing to incur a cost to punish this behaviour. This interesting result indicates two possible explanations: first, in-group favouritism, in contrast to selfish or opportunistic behaviour, may not considered as a strong enough violation of a social norm; and second, the norm of egalitarianism within the context of favouritism may still be `evolving'.
    Keywords: Social Norms, In-group Favouritism, Group Behaviour, In-group Punishment, Out-group Punishment, Third-party Punishment, Experimental Design
    JEL: D73 C92
    Date: 2010–12–13
  10. By: K. Schlag
    Date: 2010–12–09
  11. By: Christian Hilbe
    Abstract: Experimental economics has repeatedly demonstrated that the Nash equilibrium makes inaccurate predictions for a vast set of games. Instead, several alternative theoretical concepts predict behavior that is much more in tune with observed data, with the quantal response equilibrium as the most prominent example. However, here we show that this equilibrium notion itself, like any other concept that varies smoothly with the payoffs, is necessarily subject to framing effects: If the same economic problem is represented in a different but equivalent way, the predicted results will differ. As a consequence, we argue that tools and methods that are successful in explaining human behavior in laboratory experiments may be unsuitable for doing theory.
    Date: 2010–12
  12. By: Hendrik van Broekhuizen (Department of Economics, University of Stellenbosch)
    Abstract: Procrastination is an almost archetypal phenomenon of human behaviour, the nature and prevalence of which may have severe implications for the foundations of Microeconomic theory and the rational actor model. This paper aims to assess why and how agents procrastinate in theory and what the implications of procrastination may be. It is argued that procrastination is a rational response to present-biased preferences and that the extent of procrastination, and the subsequent welfare implications thereof, depends on the degree of conscientiousness regarding one’s own expected future self-control problems and the nature and requirements of the task with which one is assigned. The theoretical model proposed to analyse procrastination therefore parameterises the temporal evolution of present-biased preferences as a function of agents’ levels of conscientiousness. It is found that less conscientious agents tend to procrastinate more than more conscientious agents, that uncertainty exacerbates the extent and compounds the implications of procrastinating behaviour, and, consequently, that procrastination is more likely to be welfare non-maximising the lower an agent’s level of conscientiousness and the greater the amount of uncertainty that exists regarding the nature and requirements of the task with which the agent is assigned.
    Keywords: procrastination, dynamic inconsistency, present-biased preferences, quasi-hyperbolic discounting, differential salience, conscientiousness, sophistication, naivety
    JEL: D01 D80 D91
    Date: 2010
  13. By: Carl-Johan Dalgaard; Holger Strulik
    Abstract: This study introduces physiological aging into a simple model of optimal in- tertemporal consumption. In this endeavor we draw on the natural science literature on aging. According to the purposed theory, the speed of the aging process and the time of death are endogenously determined by optimal health investments. At the same time, physiological aspects of the aging process influence optimal savings and health investment. We calibrate the model for the average US male in 2000 and proceed to show that the calibrated model accounts well for the cross-country link between labor productivity and life expectancy in the same year (\the Preston curve"); cross-country income dierences can explain dierences in life expectancy at age 20 of up to a decade. Moreover, techno- logical change in health care of about 1.1% per year can account for the observed shift in the Preston curve between 1980 and 2000.K
    Keywords: Aging, Longevity, Health Investments, Savings, Preston Curve
    Date: 2010–07

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