nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2011‒08‒09
eleven papers chosen by
Matthew Baker
City University of New York

  1. The Minority Game Unpacked: Coordination and Competition in a Team-based Experiment By Giovanna Devetag; Francesca Pancotto; Thomas Brenner
  2. What drives failure to maximize payoffs in the lab ? A test of the inequality aversion hypothesis By Nicolas Jacquemet; Adam Zylbersztejn
  3. Explaining the harmonic sequence paradox By Ulrich Schmidt; Alexander Zimper
  4. Personal norms of sustainability and their impact on management – The case of rangeland management in semi-arid regions By Roland Olbrich; Martin F. Quaas; Stefan Baumgaertner
  5. The Strategic Use of Ambiguity By Frank Riedel; Linda Sass
  6. When Does Ethnic Diversity Lead to Violence? Evidence from the 2007 Elections in Kenya By Thomas Markussen; Kitavi Mbuvi
  7. Is population growth conducive to the sustainability of cooperation? By Stark, Oded; Jakubek, Marcin
  8. Overconfidence Increases Productivity By Yusuke Kinari; Noriko Mizutani; Fumio Ohtake; Hiroko Okudaira
  9. A model of longevity, human capital and growth By Oscar Iván AVILA MONTEALEGRE
  10. Considerateness By Edna Ullmann-Margalit
  11. Optimal Fertility along the Lifecycle By Pierre Pestieau; Grégory Ponthière

  1. By: Giovanna Devetag; Francesca Pancotto; Thomas Brenner
    Abstract: In minority games, players in a group must decide at each round which of two available options to choose, knowing that only subjects who picked the minority option obtain a positive reward. Previous experiments on the minority and similar congestion games have shown that players interacting repeatedly are remarkably able to coordinate efficiently, despite not conforming to Nash equilibrium behavior. We conduct an experiment on a minority-of-three game in which each player is a team composed by three subjects. Each team can freely discuss its strategies in the game and decisions must be made via a majority rule. Team discussions are recorded and their content analyzed to detect evidence of strategy co-evolution among teams playing together. Our main results of team discussion analysis show no evidence supporting the mixed strategy Nash equilibrium solution, and support a low-rationality, backward-looking approach to model behavior in the game, more consistent with reinforcement learning models than with belief-based models. Showing level-2 rationality (i.e., reasoning about others' beliefs) is positively and significantly correlated with higher than average earnings in the game, showing that a mildly sophisticated approach pays off. In addition, teams that are more successful tend to become more egocentric over time, paying more attention to their own past successes than to the behavior of other teams. Finally, we find evidence of mutual adaptation over time, as teams that are more strategic (i.e., they pay more attention to other teams' moves) induce competing teams to be more egocentric instead. Our results contribute to the understanding of coordination dynamics resting on heterogeneity and co-evolution of decision rules rather than on conformity to equilibrium behavior. In addition, they provide support at the decision process level to the validity of modeling behavior using low-rationality reinforcement learning models.
    Keywords: coordination, minority game, market efficiency, information, self-organization, reinforcement learning
    JEL: C72 C91 C92
    Date: 2011
  2. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Adam Zylbersztejn (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: In experiments based on the Beard and Beil (1994) game, second movers very often fail to select the decision that maximizes both players payoff. This note reports on a new experimental treatment, in which we neutralize the potential effect of inequality aversion on the likelihood of this behavior. We show this behavior is robust to this change, even after allowing for repetition-based learning.
    Keywords: Coordination failure, laboratory experiments, aversion to inequality.
    Date: 2011–06
  3. By: Ulrich Schmidt; Alexander Zimper
    Abstract: According to the harmonic sequence paradox (Blavatskyy 2006), an expected utility decision maker's willingness-to-pay for a gamble whose expected payoffs evolve according to the harmonic series is finite if and only if his marginal utility of additional income becomes zero for rather low payoff levels. Since the assumption of zero marginal utility is implausible for finite payoffs levels, expected utility theory—as well as its standard generalizations such as cumulative prospect theory—are apparently unable to explain a finite willingness-to-pay. The present paper presents first an experimental study of the harmonic sequence paradox. Additionally, it demonstrates that the theoretical argument of the harmonic sequence paradox only applies to time-patient decision makers whereas the paradox is easily avoided if time-impatience is introduced
    Keywords: St. Petersburg Paradox, Expected Utility, Time-Preferences
    JEL: C91 D81
    Date: 2011–08
  4. By: Roland Olbrich (Department of Sustainability Sciences and Department of Economics, Leuphana University of Lueneburg, Germany); Martin F. Quaas (Department of Economics, University of Kiel, Germany); Stefan Baumgaertner (Department of Sustainability Sciences and Department of Economics, Leuphana University of Lueneburg, Germany)
    Abstract: We empirically study personal norms of sustainability, conceptualized according to the normactivation theory and operationalized under the notion of strong ecological-economic sustainability, for commercial cattle farmers in semi-arid rangelands of Namibia, a system that is subject to extensive degradation. We characterize farmers’ personal norms, study their determinants, and analyze their impact on actual management based on the dual-preferences model. We find personal norms of sustainability that are heterogeneous across farmers, but vary little with socio-demographic or environmental characteristics. We find no evidence for a significant impact of personal norms on actual management behavior, which may be due to farmers not feeling capable for averting adverse long-term consequences of their management. This may contribute to the observed degradation of rangelands in Namibia.
    Keywords: commercial cattle farming, Namibia, norm-activation theory, personal norms, dual-preferences model, semi-arid rangelands, sustainability
    JEL: D63 Q12 Q57
    Date: 2011–08
  5. By: Frank Riedel (Institute of Mathematical Economics, Bielefeld University); Linda Sass (Institute of Mathematical Economics, Bielefeld University)
    Abstract: Ambiguity can be used as a strategic device in some situations. To demonstrate this, we propose and study a framework for normal form games where players can use Knightian uncertainty strategically. In such Ellsberg games, players may use Ellsberg urns in addition to the standard objective mixed strategies. We assume that players are ambiguity-averse in the sense of Gilboa and Schmeidler. While classical Nash equilibria remain equilibria in the new game, there arise new Ellsberg equilibria that can be quite different from Nash equilibria. A negotiation game with three players illustrates this finding. Another class of examples shows the use of ambiguity in mediation. We also highlight some conceptually interesting properties of Ellsberg equilibria in two person games with conflicting interests.
    Date: 2011–08
  6. By: Thomas Markussen (Department of Economics, University of Copenhagen); Kitavi Mbuvi (Kenya Institute of Education)
    Abstract: Some people have a concern for a fair distribution of incomes while others do not. Does such a concern matter for majority voting on redistribution? Fairness preferences are relevant for redistribution outcomes only if fair-minded voters are pivotal. Pivotality, in turn, depends on the structure of income classes. We experimentally study voting on redistribution between two income classes and show that the effect of inequality aversion is asymmetric. Inequality aversion is more likely to matter if the “rich” are in majority. With a “poor” majority, we find that redistribution outcomes look as if all voters were exclusively motivated by self-interest.
    Keywords: Conflict; ethnicity; poverty; unemployment; public services; Kenya
    JEL: D74 H4 J6 O55
    Date: 2011–07
  7. By: Stark, Oded; Jakubek, Marcin
    Abstract: This paper asks whether population growth is conducive to the sustainability of cooperation. A simple model is developed in which farmers who live around a circular lake engage in trade with their adjacent neighbors. The payoffs from this activity are governed by a prisoner's dilemma rule of engagement. Every farmer has one son when the population is not growing, or two sons when it is growing. In the former case, the son takes over the farm when his father dies. In the latter case, one son stays on his father's farm, whereas the other son settles around another lake, along with the other sons of the other farmers. During his childhood, each son observes the strategies and the payoffs of his father and of the trading partners of his father, and imitates the most successful strategy when starting farming on his own. Then mutant defectors are introduced into an all-cooperator community. The defector strategy may spread. A comparison is drawn between the impact in terms of the sustainability of cooperation of the appearance of the mutants in a population that is not growing, and in one that is growing. It is shown that the ex-ante probability of sustaining the cooperation strategy is higher for a community that is growing than for a stagnant community. --
    Keywords: Population growth,Imitation,Sustainability of cooperation
    JEL: C72 D01 D83 J19 J62 R12 R23
    Date: 2011
  8. By: Yusuke Kinari; Noriko Mizutani; Fumio Ohtake; Hiroko Okudaira
    Abstract: Recent studies report that productivity increases under tournament reward structures than under piece rate reward structures. We conduct maze-solving experiments under both reward structures and reveal that overconfidence is a significant factor in increasing productivity. Specifically, subjects exhibiting progressively higher degrees of overconfidence solve more mazes. This result shows a positive aspect of overconfidence, which usually has been examined in its negative aspect as an expectation bias.
    Date: 2011–08–01
    Abstract: Long run economic growth and its transitional dynamics are determined in a general equilibrium model of endogenous longevity, human capital and growth. Agents in overlapping generations survive safely for the first two periods of life and face an endogenous probability of surviving for a third period. Given this probability, each agent maximizes her expected lifetime utility choosing consumption, and the quantity of resources destined to her child’s education and health. Human capital accumulation depends on education and health expenditures and on parent’s human capital. The model produces two kinds of equilibriums, one with high life expectancy, human capital and GDP, and the other with low high life expectancy, human capital and GDP. These predictions accord with the empirical evidence on demographic transitions and development.
    Date: 2010–11–03
  10. By: Edna Ullmann-Margalit
    Abstract: A stranger entering the store ahead of you may hold the door open so it does not slam in your face, or your daughter may tidy up the kitchen when she realizes that you are very tired: both act out of considerateness. In acting considerately one takes others into consideration. The considerate act aims at contributing to the wellbeing of somebody else at a low cost to oneself. Focusing on the extreme poles of the spectrum of human relationships, I argue that considerateness is the foundation upon which our relationships are to be organized in both the thin, anonymous context of the public space and the thick, intimate context of the family. The first part of the paper, sections I–III, explores the idea that considerateness is the minimum that we owe to one another in the public space. By acting considerately toward strangers we show respect to that which we share as people, namely, to our common humanity. The second part, sections IV–VIII, explores the idea that the family is constituted on a foundation of considerateness. Referring to the particular distribution of domestic burdens and benefits adopted by each family as its “family deal,” I argue that the considerate family deal embodies a distinct, family-oriented notion of fairness. The third part, sections IX–XV, takes up the notion of family fairness, contrasting it with justice. In particular I take issue with Susan Okin's notion of the just family. Driving a wedge between justice and fairness, I propose an idea of family fairness that is partial and sympathetic rather than impartial and empathic, particular and internal rather than generalizable, and based on ongoing comparisons of preferences among family members. I conclude by characterizing the good family as the not-unjust family that is considerate and fair.
    Date: 2011–07
  11. By: Pierre Pestieau (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, CREPP - Center of Research in Public Economics and Population Economics - Université de Liège, CORE - Center of Operation Research and Econometrics [Louvain] - Université Catholique de Louvain, CEPR - Center for Economic Policy Research - CEPR); Grégory Ponthière (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, ENS - Ecole Normale Supérieure de Paris - Ecole Normale Supérieure de Paris - ENS Paris)
    Abstract: We explore the optimal fertility age-pattern in a four-period OLG economy with physical capital accumulation. For that purpose, we .rstly compare the dynamics of two closed economies, Early and Late Islands, which di¤er only in the timing of births. On Early Island, children are born from parents in young adulthood, whereas, on Late Island, children are born from parents in older adulthood. We show that, unlike on Early Island, there exists no stable stationary equilibrium on Late Island, which exhibits cyclical dynamics. We also characterize the social optimum in each economy, and show that Samuelson.s Serendipity Theorem still holds. Finally, we study the dynamics and social optimum of an economy with interior fertility rates during the reproduction period. It is shown that various fertility age-patterns are compatible with the social optimum, as long as these yield the optimal cohort growth rate. The Serendipity Theorem remains valid in that broader demographic environment.
    Keywords: childbearing ages ; early and late motherhoods ; fertility ; overlapping generations ; social optimum
    Date: 2011–07

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