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on Evolutionary Economics |
| By: | Daron Acemoglu; Matthew O. Jackson |
| Abstract: | We study the evolution of the social norm of "cooperation" in a dynamic environment. Each agent lives for two periods and interacts with agents from the previous and next generations via a coordination game. "History" matters because agents only receive noisy information about the play of the previous generation and their interpretation of these signals is shaped by history. We characterize the conditions under which history completely drives equilibrium play, leading to a social norm of high or low cooperation. The impact of history is potentially countered by "prominent" agents, whose actions are more visible (in our baseline model, observed by all future agents), and who can leverage their greater visibility to influence expectations of other agents and overturn social norms of low cooperation. We also show that in equilibria not completely driven by history, there is a pattern of "reversion" whereby play starting with high (low) cooperation reverts toward lower (higher) cooperation. We study the evolution of the social norm of "cooperation" in a dynamic environment. Each agent lives for two periods and interacts with agents from the previous and next generations via a coordination game. "History" matters because agents only receive noisy information about the play of the previous generation and their interpretation of these signals is shaped by history. We characterize the conditions under which history completely drives equilibrium play, leading to a social norm of high or low cooperation. The impact of history is potentially countered by "prominent" agents, whose actions are more visible (in our baseline model, observed by all future agents), and who can leverage their greater visibility to influence expectations of other agents and overturn social norms of low cooperation. We also show that in equilibria not completely driven by history, there is a pattern of "reversion" whereby play starting with high (low) cooperation reverts toward lower (higher) cooperation. |
| JEL: | C72 C73 D7 P16 Z1 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17066&r=evo |
| By: | Oded Galor; Stelios Michalopoulos |
| Abstract: | This research suggests that a Darwinian evolution of entrepreneurial spirit played a significant role in the process of economic development and the dynamics of inequality within and across societies. The study argues that entrepreneurial spirit evolved non-monotonically in the course of human history. In early stages of development, risk-tolerant, growth promoting traits generated an evolutionary advantage and their increased representation accelerated the pace of technological progress and the process of economic development. In mature stages of development, however, risk-averse traits gained an evolutionary advantage, diminishing the growth potential of advanced economies and contributing to convergence in economic growth across countries. |
| JEL: | J11 J13 O11 O14 O33 O40 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17075&r=evo |
| By: | Normann, Hans-Theo; Wallace, Brian |
| Abstract: | Cooperation in prisoner's dilemma games can usually be sustained only if the game has an infinite horizon. We analyze to what extent the theoretically crucial distinction of finite vs. infinite-horizon games is reflected in the outcomes of a prisoner's dilemma experiment. We compare three different experimental termination rules in four treatments: a known finite end, an unknown end, and two variants with a random termination rule (with a high and with a low continuation probability, where cooperation can occur in a subgame-perfect equilibrium only with the high probability). We find that the termination rules do not significantly affect average cooperation rates. Specifically, employing a random termination rule does not cause significantly more cooperation compared to a known finite horizon, and the continuation probability does not significantly affect average cooperation rates either. However, the termination rules may influence cooperation over time and end-game behavior. Further, the (expected) length of the game significantly increases cooperation rates. The results suggest that subjects may need at least some learning opportunities (like repetitions of the supergame) before significant backward induction arguments in finitely repeated game have force. -- |
| Keywords: | Prisoner's dilemma,Repeated games,Infinite-horizon games,Experimental economics |
| JEL: | C72 C92 D21 D43 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:19&r=evo |
| By: | Dominic Rohner (Department of Economics, University of Zurich); Mathias Thoenig (Department of Economics, University of Lausanne); Fabrizio Zilibottix (Department of Economics, University of Zurich) |
| Abstract: | We construct a dynamic theory of civil conflict hinging on inter-ethnic trust and trade. The model economy is inhabited by two ethnic groups. Inter-ethnic trade requires imperfectly observed bilateral investments and one group has to form beliefs on the average propensity to trade of the other group. Since conflict disrupts trade, the onset of a conflict signals that the aggressor has a low propensity to trade. Agents observe the history of conflicts and update their beliefs over time, transmitting them to the next generation. The theory bears a set of testable predictions. First, war is a stochastic process whose frequency depends on the state of endogenous beliefs. Second, the probability of future conflicts increases after each conflict episode. Third, "accidental" conflicts that do not reflect economic fundamentals can lead to a permanent breakdown of trust, plunging a society into a vicious cycle of recurrent conflicts (a war trap). The incidence of conflict can be reduced by policies abating cultural barriers, fostering inter-ethnic trade and human capital, and shifting beliefs. Coercive peace policies such as peacekeeping forces or externally imposed regime changes have instead no persistent effects. |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:hic:wpaper:95&r=evo |
| By: | Elvire Guillaud (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | People's preferences for state intervention in social policies vary. A cross-section analysis on individual-level survey data is conducted here to highlight the link between the economic position of agents and their specific demand for redistribution. Controlling for a number of factors usually found to affect individual preferences in the literature, the egoistic motives for redistribution are taken seriously and this article focuses on the role played by the occupational status of individuals in shaping their preferences. Thus, the relative importance of economic factors in terms of current and expected gains is estimated, taking into account individuals' experience of social mobility and risk aversion. Furthermore, the research presented here identifies which socio-political groups may be formed on the basis of their preferences for redistribution. |
| Keywords: | Redistribution, occupation, social mobility, ordered logit regression. |
| Date: | 2011–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00594072&r=evo |
| By: | Abeler, Johannes (University of Nottingham); Altmann, Steffen (IZA); Goerg, Sebastian (Max Planck Institute for Research on Collective Goods); Kube, Sebastian (University of Bonn); Wibral, Matthias (University of Bonn) |
| Abstract: | In this paper, we discuss recent evidence from economic experiments that study the impact of social preferences on workplace behavior. We focus on situations in which a single employer interacts with multiple employees. Traditionally, equity and efficiency have been seen as opposing aims in such work environments: individual pay-for-performance schemes maximize efficiency but might lead to inequitable outcomes. We present findings from laboratory experiments that show under which circumstances partially incomplete contracts can create equitable work environments while at the same time reaching surprisingly efficient outcomes. |
| Keywords: | incentives, wage setting, equity, gift exchange, reciprocity, incomplete contracts, organizational economics, laboratory experiments |
| JEL: | J33 D63 M52 C92 J41 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5727&r=evo |
| By: | Berggren, Niclas (The Ratio Institute) |
| Abstract: | This study analyzes leading research in behavioral economics to see whether it contains advocacy of paternalism and whether it addresses the potential cognitive limitations and biases of the policymakers who are going to implement paternalist policies. The findings reveal that 20.7% of the studied articles in behavioral economics propose paternalist policy action and that 95.5% of these do not contain any analysis of the cognitive ability of policymakers. This suggests that behavioral political economy, in which the analytical tools of behavioral economics are applied to political decision-makers as well, would offer a useful extension of the research program. |
| Keywords: | Behavioral economics; Anomalies; Rationality; Homo economicus; Public choice |
| JEL: | D78 |
| Date: | 2011–05–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ratioi:0166&r=evo |
| By: | McMahon, Michael (University of Warwick) |
| Abstract: | Using an experiment, I compare the use of the `Beer Distribution' classroom game with the more traditional `chalk and talk' approach to teach students about inventories and the macroeconomy. My empirical results confirm and extend our understanding of the relative strengths and weaknesses of the use of classroom games : the game tends to improve interest and motivation on average, though some students dislike their use ; the game is e ective at driving home its key messages, but it may wrongly lead students to disregard other important factors ; the game is inferior where facts mastery or definitional learning is required. Rather than an endorsement or a criticism of classroom games, the conclusion is cautionary advice on how to best make use of games within an overall course. Key words: Classroom experiments and games ; motivation ; student learning outcomes JEL classification: A22 ; C90 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:964&r=evo |
| By: | Jaśkiewicz, Anna; Matkowski, Janusz; Nowak, Andrzej S. |
| Abstract: | This paper generalizes the classical discounted utility model introduced by Samuelson by replacing a constant discount rate with a function. The existence of recursive utilities and their constructions are based on Matkowski's extension of the Banach Contraction Principle. The derived utilities go beyond the class of recursive utilities studied in the literature and enable a discussion on subtle issues concerning time preferences in the theory of finance, economics or psychology. Moreover, our main results are applied to the theory of optimal growth with unbounded utility functions. |
| Keywords: | Dynamic programming Variable discounting Bellman equation |
| JEL: | D90 C61 |
| Date: | 2011–01–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:31069&r=evo |
| By: | Gerald Eisenkopf (Department of Economics, University of Konstanz, Germany); Ruslan Gurtoviy (Department of Business Administration, University of Trier, Germany); Verena Utikal (Department of Economics, University of Erlangen-Nürnberg, Germany) |
| Abstract: | A small lie appears trivial but it obviously violates moral commandments. We analyze whether the preference for others’ truth telling is absolute or depends on the size of a lie. In a laboratory experiment we compare punishment for different sizes of lies controlling for the resulting economic harm. We find that people are sensitive to the size of a lie and that this behavioural pattern is driven by honest people. People who lie themselves punish softly in any context. |
| Keywords: | Lying, norm violation, punishment, experiment |
| JEL: | C91 D82 |
| Date: | 2011–05–17 |
| URL: | http://d.repec.org/n?u=RePEc:knz:dpteco:1114&r=evo |
| By: | Karen Kaiser |
| Abstract: | This paper analyzes the effect of information overload on preference or aversion for variety. According to the model, a rational decision maker who suffers from information overload, faces a two-stage decision process, and is choosing from a set of unknown goods will find it optimal at some point to become variety averse. To test this hypothesis, an experiment is conducted, and its results, that subjects suffering from information overload use variety aversion as a strategy to deal with their cognitive limitations, are consistent with the model. Moreover, results suggest that subjects are, on the average, choosing the optimal number of goods. As the price of the goods increases, subjects become more variety averse. In addition, as they become more experienced, they prefer larger sets of goods. |
| Keywords: | Variety aversion, information overload, bounded rationality, decision making, laboratory experiment. |
| JEL: | C91 D81 D83 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:bdm:wpaper:2011-01&r=evo |