nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2011‒02‒19
seven papers chosen by
Matthew Baker
City University of New York

  1. Social Norm, Costly Punishment and the Evolution to Cooperation By Tongkui, Yu; Shu-Heng, Chen; Honggang, Li
  2. On evolutionarily stable strategies and replicator dynamics in asymmetric two-population games By Elvio Accinelli; Edgar J. Sánchez Carrera
  3. How to play the games? Nash versus Berge behavior rules By Pierre Courtois; Rabia Nessah; Tarik Tazdaït
  4. Bounded Rationality By Penelope Hernandez; Coralio Ballester
  5. Endogenous preferences in games with type indeterminate players By Ariane Lambert-Mogiliansky
  6. Empirical Economic Model Discovery and Theory Evaluation By David F. Hendry
  7. Behavioral Economics Perspectives on Public Sector Pension Plans By Beshears, John; Choi, James J.; Laibson, David; Madrian, Brigitte C.

  1. By: Tongkui, Yu; Shu-Heng, Chen; Honggang, Li
    Abstract: Both laboratory and field evidence suggest that people tend to voluntarily incur costs to punish non-cooperators. While costly punishment typically reduces the average payoff as well as promotes cooperation. Why does the costly punishment evolve? We study the role of punishment in cooperation promotion within a two-level evolution framework of individual strategies and social norms. In a population with certain social norm, players update their strategies according to the payoff differences among different strategies. In a longer horizon, the evolution of social norm may be driven by the average payoffs of of all members of the society. Norms differ in whether they allow or do not allow for the punishment action as part of strategies, and, for the former, they further differ in whether they encourage or do not encourage the punishment action. The strategy dynamics are articulated under different social norms. It is found that costly punishment does contribute to the evolution toward cooperation. Not only does the attraction basin of cooperative evolutionary stable state (CESS) become larger, but also the convergence speed to CESS is faster. These two properties are further enhanced if the punishment action is encouraged by the social norm. This model can be used to explain the widespread existence of costly punishment in human society.
    Keywords: social norm; costly punishment; cooperative evolutionary stable state; attraction basin; convergence speed
    JEL: C02 D64 C73
    Date: 2011–02–01
  2. By: Elvio Accinelli (Facultad de Economía, Universidad Autónoma de san Luis Potosí. Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República); Edgar J. Sánchez Carrera (Department of Economics at the University of Siena.)
    Abstract: We analyze the main dynamical properties of the evolutionarily stable strategy ESS for asymmetric two-population games of finite size in its corresponding replicator dynamics. We introduce a defnition of ESS for two-population asymmetric games and a method of symmetrizing such an asymmetric game. Then, we show that every strategy profile of the asymmetric game corresponds to a strategy in the symmetric game, and that every Nash equilibrium (NE) of the asymmetric game corresponds to a (symmetric) NE of the symmetric version game. So, we study (standard) replicator dynamics for the asymmetric game and define corresponding (non-standard) dynamics of the symmetric game.
    Keywords: Asymmetric game; Evolutionary games; ESS; Replicator dynamics.
    JEL: C72 C73 C79
    Date: 2010–07
  3. By: Pierre Courtois; Rabia Nessah; Tarik Tazdaït
    Abstract: Social interactions regularly lead to mutually beneficial transactions that are sometimes puzzling. The prisoner’s dilemma and the chicken and trust games prove to be less perplexing than Nash equilibrium predicts. Moral preferences seem to complement self-oriented motivations and their relative predominance in games is found to vary according to the individuals, their environment, and the game. This paper examines the appropriateness of Berge equilibrium to study several 2×2 game situations, notably cooperative games where mutual support yields socially better outcomes. We consider the Berge behavior rule complementarily to Nash: individuals play one behavior rule or another, depending on the game situation. We then define non-cooperative Berge equilibrium, discuss what it means to play in this fashion, and argue why individuals may choose to do so. Finally, we discuss the relationship between Nash and Berge notions and analyze the rationale of individuals playing in a situational perspective.
    Date: 2011–05
  4. By: Penelope Hernandez (ERI-CES); Coralio Ballester (University Alicante)
    Abstract: The observation of the actual behavior by economic decision makers in the lab and in the field justifies that bounded rationality has been a generally accepted assumption in many socio-economic models. The goal of this paper is to illustrate the difficulties involved in providing a correct definition of what a rational (or irrational) agent is. In this paper we describe two frameworks that employ different approaches for analyzing bounded rationality. The first is a spatial segregation set-up that encompasses two optimization methodologies: backward induction and forward induction. The main result is that, even under the same state of knowledge, rational and non-rational agents may match their actions. The second framework elaborates on the relationship between irrationality and informational restrictions. We use the beauty contest (Nagel, 1995) as a device to explain this relationship.
    Keywords: Behavioral economics, bounded rationality, partial information
    JEL: C61 C73
    Date: 2011–01
  5. By: Ariane Lambert-Mogiliansky (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)
    Abstract: The Type Indeterminacy model is a theoretical framework that uses some elements of quantum formalism to model the constructive preference perspective suggested by Kahneman and Tversky. In this paper we extend the TI-model from simple to strategic decision-making and show that TI-games open a new field of strategic interaction. We first establish an equivalence result between static games of incomplete information and static TI-games. We next develop a new solution concept for non-commuting dynamic TI-games. The updating rule captures the novelty brought about by Type Indeterminacy namely that in addition to affecting information and payoffs, the action of a player impacts on the profile of types. We provide an example showing that TI-game predictions cannot be obtained as Bayes Nash equilibrium of the corresponding classical game.
    Keywords: type indeterminacy ; games ; endogeneous preferences
    Date: 2010–06
  6. By: David F. Hendry
    Abstract: Economies are so high dimensional and non-constant that many features of models cannot be derived by prior reasoning, intrinsically involving empirical discovery and requiring theory evaluation. Despite important differences, discovery and evaluation in economics are similar to those of science. Fitting a pre-specified equation limits discovery, but automatic methods can formulate much more general models with many variables, long lag lengths and non-linearities, allowing for outliers, data contamination, and parameter shifts; select congruent parsimonious-encompassing models even with more candidate variables than observations, while embedding the theory; then rigorously evaluate selected models to ascertain their viability.
    Keywords: Empirical discovery, theory evaluation, model selection, Autometrics
    JEL: B40
    Date: 2011
  7. By: Beshears, John (Stanford University); Choi, James J. (Yale School of Management); Laibson, David (Harvard University); Madrian, Brigitte C. (Harvard Kennedy School)
    Abstract: We describe the pension plan features of the states and the largest cities and counties in the U.S. Unlike in the private sector, defined benefit (DB) pensions are still the norm in the public sector. However, a few jurisdictions have shifted towards defined contribution (DC) plans as their primary savings plan, and fiscal pressures are likely to generate more movement in this direction. Holding fixed a public employee's work and salary history, we show that DB retirement income replacement ratios vary greatly across jurisdictions. This creates large variation in workers' need to save for retirement in other accounts. There is also substantial heterogeneity across jurisdictions in the savings generated in primary DC plans because of differences in the level of mandatory employer and employee contributions. One notable difference between public and private sector DC plans is that public sector primary DC plans are characterized by required employee or employer contributions (or both), whereas private sector plans largely feature voluntary employee contributions that are supplemented by an employer match. We conclude by applying lessons from savings behavior in private sector savings plans to the design of public sector plans.
    JEL: G23 G28 H76
    Date: 2011–02

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