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on Evolutionary Economics |
| By: | Fehr, Ernst; Hoff, Karla |
| Abstract: | Economists have traditionally treated preferences as exogenously given. Preferences are assumed to be influenced by neither beliefs nor the constraints people face. As a consequence, changes in behaviour are explained exclusively in terms of changes in the set of feasible alternatives. Here the authors argue that the opposition to explaining behavioural changes in terms of preference changes is ill-founded, that the psychological properties of preferences render them susceptible to direct social influences, and that the impact of"society"on preferences is likely to have important economic and social consequences. |
| Keywords: | Biodiversity,Labor Policies,Economic Theory&Research,Cultural Policy,Gender and Social Development |
| Date: | 2011–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5760&r=evo |
| By: | Uslaner, Eric (Stockholm University Linnaeus Center for Integration Studies - SULCIS) |
| Abstract: | There is a growing concern across the West that diversity (and immigration) has led to a decline in trust and social cohesion. In this working paper, which is based upon the core theoretical chapter of my book under contract to Cambridge University Press, Segregation and Mistrust, I argue that it is not diversity but segregation that drives down trust. I argue that the negative effects of diversity have been overstated, as has the simple idea that contact among people of different backgrounds will build trust. There is stronger evidence for Allport's "optimal contacts," where people have deeper and more frequent contacts based upon a foundation of equality. There is little evidence of a direct link between diverse contacts and trust. Nor is there strong evidence of a negative relationship between diversity and trust. I argue that it is not diversity but residential segregation that drives down trust. To build trust, people must live in neighborhoods that are integrated and diverse-and have heterogenous friendship networks-as Allport and Pettigrew have argued. I show that diversity and segregation are not the same thing and show that segregation leads to both greater inequality and worse outcomes on several measures across American communities and across nations. I also argue that governmental multiculturalism policies reinforce a strong sense of ethnic identity, which leads to high in-group trust at the expense of generalized trust. |
| Keywords: | trust; segregation; diversity; multiculturalism |
| JEL: | A13 Z13 |
| Date: | 2011–08–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sulcis:2011_005&r=evo |
| By: | Chong Huang (Department of Economics, University of Pennsylvania) |
| Abstract: | This paper studies the interaction between coordination and social learning in a dynamic regime change game. Social learning provides public information to which players overreact due to the coordination motive. So coordination affects the aggregation of private signals through players' optimal choices. Such endogenous provision of public information results in inefficient herds with positive probability, even though private signals have an unbounded likelihood ratio property. Therefore, social learning is a source of coordination failure. An extension shows that if players could individually learn, inefficient herding disappears, and thus coordination is successful almost surely. This paper also demonstrates that along the same history, the belief convergence differs in different equilibria. Finally, social learning can lead to higher social welfare when the fundamentals are bad. |
| Keywords: | Coordination, social learning, inefficient herding, dynamic global game, common belief |
| JEL: | C72 C73 D82 D83 |
| Date: | 2011–08–05 |
| URL: | http://d.repec.org/n?u=RePEc:pen:papers:11-021&r=evo |
| By: | Nicole Wiebach; Jana L. Diels |
| Abstract: | In general, consumer preferences depend on the context of a decision situation. This paper highlights the context-dependence of substitution behavior in out-of-stock (OOS) situations and provides evidence for the relevance of promotion as essential driver of customers' OOS reactions. We demonstrate both theoretically and empirically how OOS-induced preference shifts can be explained and predicted using context and phantom theory. In a series of experiments, we show that consumers substitute in accordance to a negative similarity effect, which is reduced for stock-outs of promoted low-involvement FCMGs. If a similar substitute is offered at a reduced price, the effect is enforced. For dissimilar substitutes, we show the contrary. The empirical findings further suggest an augmented probability of purchase postponement and a significant smaller chance of brand switching for stock-outs of promotional products. Furthermore, our study emphasizes outlet switching as a so far uninvestigated OOS reaction and discusses implications for retailers and manufacturers. |
| Keywords: | Out-of-Stock, Context Effects, Phantoms, Promotion, Preference Shifts |
| JEL: | M31 C12 C13 C81 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2011-050&r=evo |
| By: | Klaus Adam; Albert Marcet |
| Abstract: | We present a decision theoretic framework in which agents are learning about market behavior and that provides microfoundations for models of adaptive learning. Agents are 'internally rational', i.e., maximize discounted expected utility under uncertainty given dynamically consistent subjective beliefs about the future, but agents may not be 'externally rational', i.e., may not know the true stochastic process for payoff relevant variables beyond their control. This includes future market outcomes and fundamentals. We apply this approach to a simple asset pricing model and show that the equilibrium stock price is then determined by investors' expectations of the price and dividend in the next period, rather than by expectations of the discounted sum of dividends. As a result, learning about price behavior affects market outcomes, while learning about the discounted sum of dividends is irrelevant for equilibrium prices. Stock prices equal the discounted sum of dividends only after making very strong assumptions about agents' market knowledge. |
| Keywords: | learning, internal rationality, consumption based asset pricing |
| JEL: | G12 G14 D83 D84 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1068&r=evo |
| By: | Da Silva, Sergio; Baldo, Dinora; Matsushita, Raul |
| Abstract: | We conducted a questionnaire study with student subjects to look for explicit correlations between selected biological characteristics of the subjects and manifestation of the Allais paradox in the pattern of their choices between sets of two pairs of risky prospects. We found that particular characteristics, such as gender, menstrual cycle, mother’s age at delivery, parenthood, second- to fourth-digit ratio, perceived negative life events, and emotional state, can be related to the paradox. Women,particularly when not menstruating, are less susceptible to the paradox. Those born to not-too-young mothers are also less prone to the paradox. The same holds true for men who have fathered children and had been exposed to high levels of prenatal testosterone, people who had experienced many negative life events, and those who were anxious, excited, aroused, happy, active, or fresh at the time of the experiment. Further, left-handers and atheists may be less inclined to display the paradox. |
| Keywords: | Allais paradox; choice under risk; biological characteristics; experimental economics |
| JEL: | D81 C91 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32747&r=evo |
| By: | Merche, Nicola |
| Abstract: | This paper aims to provide a detailed socio-economic analysis of the town of Carbonia yielding insights which could serve as a stimulus and reflection, in order to guide policy makers to the adoption of public policies that could relaunch the town and the territory, making them more competitive and livable. In order to frame the phenomenon we analyse the dynamics of productivity, income, population and level of education. All those elements are taken as proxies of the quality of life in the municipal territory as well as of the endowment of material and immaterial resources. The study shows a puzzled reality that highlights both the strengths and the limits of the municipality of Carbonia, compared with other Sardinian towns. |
| Keywords: | Labor and demographic economy; socio-economic; human capital |
| JEL: | R0 E24 J0 |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32497&r=evo |
| By: | Stark, Oded; Rendl, Franz; Jakubek, Marcin |
| Abstract: | Let a societyâs unhappiness be measured by the aggregate of the levels of relative deprivation of its members. When two societies of equal size, F and M, merge, unhappiness in the merged society is shown to be higher than the sum of the levels of unhappiness in the constituent societies when apart; merger alone increases unhappiness. But when societies F and M merge and marriages are formed such that the number of households in the merged society is equal to the number of individuals in one of the constituent societies, unhappiness in the merged society is shown to be lower than the aggregate unhappiness in the two constituent societies when apart. This result obtains regardless of which individuals from one society form households with which individuals from the other, and even when the marriages have not (or not yet) led to income gains to the married couples from increased efficiency, scale economies, and the like. While there are various psychological reasons for people to become happier when they get married as opposed to staying single, the very formation of households reduces social distress even before any other happiness-generating factors kick in. |
| Keywords: | Merger of populations, Integration of societies, Unhappiness, Marriages, Relative deprivation, Institutional and Behavioral Economics, D0, D10, D31, D63, |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:ubzefd:109968&r=evo |
| By: | Jonathana E. Alevy (Department of Economics, University of Alaska Anchorage); Craig E. Landry (Department of Economics, East Carolina University); John A. List (Department of Economics, University of Chicago) |
| Abstract: | A pillar of behavioral research is the view that preferences are constructed during the value elicitation process, but it is unclear whether, and to what extent, such biases influence real market equilibria. This paper examines the “anchoring” phenomenon in the field. The first experiment produces evidence that inexperienced consumers can be anchored in the value elicitation process, yet there is little evidence that experienced agents are influenced by anchors. The second experiment finds that anchors have only transient effects on prices and quantities traded: aggregate market outcomes converge to the intersection of supply and demand after a few market periods. |
| Keywords: | field experiment, anchoring, valuation, experience |
| JEL: | C92 M11 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ala:wpaper:2011-02&r=evo |