nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2011‒10‒15
eighteen papers chosen by
Matthew Baker
City University of New York

  1. A Simple Approach for Organizing Behavior and Explaining Cooperation in Repeated Games By Asen Ivanov; Douglas D. Davis; Korenok Oleg
  2. Halting the Rural Race to the Bottom: An Evolutionary Model of Rural Development to Analyse Neo-endogenous Policies in the EU By Petrick, Martin
  3. The public loss game: An experimental study of public bads By Schosser, Stephan; Vogt, Bodo
  4. A Simple Questionnaire Can Change Everything - Are Strategy Choices in Coordination Games Stable? By Lora R. Todorova; Siegfried K. Berninghaus; Bodo Vogt
  5. Fund managers - why the best might be the worst: On the evolutionary vigor of risk-seeking behavior By Witte, Björn-Christopher
  6. The emergence of emotions and pro-social and religious sentiments during the September 11 disaster By David A. Savage; Benno Torgler
  7. An Economic-Psychological Model of Sustainable Food Consumption By Lombardini, Chiara; Lankoski, Leena
  8. Expected Utility or Prospect Theory Maximizers? Results from a Structural Model based on Field-experiment Data By Bocqueho, Geraldine; Jacquet, Florence; Reynaud, Arnaud
  9. Islands of Sustainability in Time and Space By Kimberly Burnett; Lee Endress; Majah-Leah Ravago; James Roumasset; Christopher Wada
  10. Payment schemes in random-termination experimental games By Katerina Sherstyuk; Nori Tarui; Majah-Leah Ravago; Tatsuyoshi Saijo
  11. Who acts more like a game theorist? Group and individual play in a sequential market game and the effect of the time horizon By Wieland Mueller; Fangfang Tan
  12. Mechanisms of peer interactions between native and non-native students: rejection or integration? By Marco Tonello
  13. Truth-Telling and Trust in Sender-Receiver Games with Intervention By Mehmet Y. Gurdal; Ayca Ozdogan; Ismail Saglam
  14. Accounting for Heterogeneity in Hedging Behavior: Comparing & Evaluating Grouping Methods By Pennings, Joost M.E.; Garcia, Philip; Irwin, Scott H.
  15. Regional Councils in the Creation of Social Capital By Murray, Catherine
  16. Eliciting Risk Preferences: A Field Experiment on a Sample of French Farmers By Bougherara, Douadia; Gassmann, Xavier; Piet, Laurent
  17. On the existence and the number of limit cycles in evolutionary games By Moreira, Helmar Nunes; Araujo, Ricardo Azevedo
  18. Nudges and Impatience: Evidence from a Large Scale Experiment By Wieland Mueller; Eline van der Heijden; Tobias J. Klein; Jan Potters

  1. By: Asen Ivanov (Department of Economics, VCU School of Business); Douglas D. Davis (Department of Economics, VCU School of Business); Korenok Oleg (Department of Economics, VCU School of Business)
    Abstract: We introduce a novel approach for organizing behavior and explaining cooperation in repeated games. Our approach is based on the idea that players differ according to an inherent propensity to cooperate that systematically affects behavior and cooperation levels. We formulate the empirical implications of this idea and test them in the lab. Our data support our approach. Our main conclusions are: (i) players’ strategies in a repeated game can be ranked along a single dimension, (ii) this ranking remains stable across repeated games, and (iii) the composition of a group, in terms of its players’ propensities, strongly affects cooperation levels.
    Keywords: repeated games, cooperation, experiment
    JEL: D74 C92
    Date: 2011–05
  2. By: Petrick, Martin
    Abstract: The article contributes to the understanding of neo-endogenous rural development policies from the perspective of evolutionary game theory. Rural development is modelled as the increasing realisation over time of gains from interaction by rural stakeholders. The model exhibits two dynamically stable equilibria, which depict declining and prospering regions. Neo-endogenous policies are interpreted as stimuli emerging from an external government authority which help decentralised actors to coordinate on the superior of the two equilibria. External intervention may thus be possible and desirable without giving up the autonomy of local decision makers. However, because initial conditions matter, outcomes cannot be planned or engineered from the outside.
    Keywords: Rural governance, neo-endogenous policies, evolutionary game theory, collective action., Community/Rural/Urban Development, C73, R23, R58,
    Date: 2011
  3. By: Schosser, Stephan; Vogt, Bodo
    Abstract: We analyze cooperative behavior of participants who faced a loss. In particular, we extend the Public Good Game by a fixed loss in the beginning of every period. We show that humans change their behavior compared to corresponding studies with gains only. First, in contrast to literature on gains, we observe significant order effects. When participants first play a treatment with punishment, they cooperate less and face higher punishment costs than when first playing a treatment without punishment. The changes are that drastic that punishment does not pay in the first case, while it does in the later. Second, for participants first playing without punishment the contributions in the very first period of play determine the contributions throughout both treatments of the game, yielding higher contributions in the punishment treatment than when playing with gains. Participants punishing first, show no comparable behavior. --
    Keywords: public good,punishment,losses,experiment
    Date: 2011
  4. By: Lora R. Todorova (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Siegfried K. Berninghaus (Karlsruhe Institute of Technology (KIT), Institute for Economic Theory and Statistics); Bodo Vogt (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: This paper presents results from an experiment designed to study the effect of self reporting risk preferences on strategy choices made in a subsequently played 2× 2 coordination game.The main finding is that the act of answering a questionnaire about one's own risk preferences significantly alters strategic behavior. Within a best response correspondence framework, this result can be explained by a change in either risk preferences or beliefs. We find that self reporting risk preferences induces an increase in subjects' risk aversion while keeping their beliefs unchanged. Our findings raise some questions about the stability of strategy choices in coordination games.
    Keywords: coordination game, questionnaire, risk preferences, beliefs, best response correspondence
    JEL: D81 C91 C72
    Date: 2011–09
  5. By: Witte, Björn-Christopher
    Abstract: This article explores the influence of competitive conditions on the evolutionary fitness of different risk preferences. As a practical example, the professional competition between fund managers is considered. To explore how different settings of competition parameters, the exclusion rate and the exclusion interval, affect individual investment behavior, an evolutionary model based on a genetic algorithm is developed. The simulation experiments indicate that the influence of competitve conditions on investment behavior and attitudes towards risk is significant. What is alarming is that intense competitive pressure generates riskseeking behavior and undermines the predominance of the most skilled. --
    Keywords: risk preferences,competition,genetic programming,fund managers,portfolio theory
    JEL: C73 D81 G11 G24
    Date: 2011
  6. By: David A. Savage; Benno Torgler
    Abstract: Analysing emotional states under duress or during heightened, life-and-death situations is extremely difficult, especially given the inability of laboratory experiments to adequately replicate the environment and the inherent biases of post event surveys. It is in this area that natural experiments come to the fore by combining the randomization that comes from natural data with an experimentally realistic event. The pager communications from September 11th, made publicly available by Wiki Leaks (Wiki Leaks, 2009), provide exactly the kind of natural experiment emotion researchers have been seeking. We have analysed the pager messages by applying an absolute count methodology and by presenting both positive and negative emotive categories as well as the development of pro-social and religious sentiment. Providing behavioural evidence on how people communicate under extreme circumstances and offers valuable insights into human nature. We demonstrate that positive and pro-social communications are the first to emerge followed by the slower and lower negative communications. Religious sentiment is the last to emerge, as individual attempt to make sense of event.
    Keywords: Content Analysis; Positive Emotion; Negative Emotion; Religiosity; Disaster Communications; 9/11
    JEL: D70 D64 Z12 N30 Z10
    Date: 2011–10
  7. By: Lombardini, Chiara; Lankoski, Leena
    Abstract: This paper proposes a novel economic-psychological model of individual food consumption and food waste that recognizes individuals as social and moral beings who are boundedly rational and have limited capacity for self-control. The model identifies five components of individualsâ utility that correspond to five modes of being or selves: the hedonic agent, the social agent, the moral agent, the health-conscious agent and the habits-driven agent. In the model, individuals maximize this composite utility given their budget and effort constraints. We apply the model to analyze policies that can support the adoption of sustainable food consumption practices.
    Keywords: bounded rationality, bounded self-control, habits, identity, social and moral norms, sustainable food consumption, Food Consumption/Nutrition/Food Safety, D03, D11, D12,
    Date: 2011
  8. By: Bocqueho, Geraldine; Jacquet, Florence; Reynaud, Arnaud
    Abstract: We elicit risk preferences of French farmers in a field experimental setting under expected utility theory and cumulative prospect theory. We use two different estimation methods, namely the interval approach and the estimation of a random preference model. On average, farmers are risk averse and loss averse. They also exhibit an inverse S-shaped probability weighting function, meaning that they tend to overweight small probabilities and underweight high probabilities. We infer from our results that CPT explains farmersâ behaviour better than EUT in the context of our experiment. We also investigate how preferences correlate with individual socio-demographic characteristics. We find that education and agricultural innovation are negatively linked with risk aversion. Our results also show that age, education, household size and the level of secured income tend to lower farmersâ loss aversion. Finally, older farmers and farmers with large farms distort probabilities less than the others. These findings contribute to the literature which compares expected utility with competing decision theories. They also give important insights into farmersâ behaviour towards risk, which is critical for relevant public policy design.
    Keywords: risk preferences, field experiment, experimental economics, prospect theory, Risk and Uncertainty, C91, D81, J16, Q12,
    Date: 2011
  9. By: Kimberly Burnett (University of Hawai‘I Economic Research Organization (UHERO)); Lee Endress (Department of Economics, University of Hawaii); Majah-Leah Ravago (Department of Economics, University of Hawaii); James Roumasset (Department of Economics, University of Hawaii); Christopher Wada (University of Hawai‘I Economic Research Organization (UHERO))
    Abstract: We review the economics perspective on sustainable resource use and sustainable development. Under standard conditions, dynamic efficiency leads to sustainability of renewable resources but not the other way around. For the economic-ecological system as a whole, dynamic efficiency and intergenerational equity similarly lead to sustainability, but ad hoc rules of sustainability may well lead to sacrifices in human welfare. We then address the challenges of extending economic sustainability to space as well as time and discuss the factors leading to optimal islands of preservation regarding renewable resources. Exogenous mandates based on moral imperatives such as self-sufficiency and strong sustainability may result in missed win-win opportunities that could improve both the economy and the environment, as well as increase social welfare across generations.
    Keywords: Islands of sustainability, sustainable development, sustainability science, fisheries, forests
    JEL: Q01 Q23 Q22
    Date: 2011–09–14
  10. By: Katerina Sherstyuk (Department of Economics, University of Hawaii at Manoa); Nori Tarui (Department of Economics, University of Hawaii at Manoa); Majah-Leah Ravago (Department of Economics, University of Hawaii at Manoa); Tatsuyoshi Saijo (Department of Economics, Osaka University)
    Abstract: We consider payment schemes in experiments that model infinite-horizon games by using random termination. We compare paying subjects cumulatively for all periods of the game; with paying subjects for the last period only; with paying for one of the periods, chosen randomly. Theoretically, assuming expected utility maximization and risk neutrality, both the cumulative and the last-period payment schemes induce preferences that are equivalent to maximizing the discounted sum of utilities. The last-period payment is also robust under different attitudes towards risk. In comparison, paying subjects for one of the periods chosen randomly creates a present-period bias. Experimentally, we find that the cumulative payment appears the best in inducing long-sighted behavior.
    Keywords: economic experiments; infinite-horizon games; random termination
    JEL: C90 C73
    Date: 2011–03–01
  11. By: Wieland Mueller; Fangfang Tan
    Abstract: Previous experimental results on one-shot sequential two-player games show that group de- cisions are closer to the subgame-perfect Nash equilbirum than individual decisions. We extend the analysis of inter-group versus inter-individual decision making to a Stackelberg market game, by running both one-shot and repeated markets. Whereas in the one-shot markets we ?nd no signi?cant di¤erences in the behavior of groups and individuals, we ?nd that the behavior of groups is further away from the subgame-perfect equilibrium of the stage game than that of individuals. To a large extent, this result is independent of the method of eliciting choices (sequential or strategy method) and the method used to account for observed ?rst- and second- mover behavior. We provide evidence on followers?response functions and electronic chats to o¤er an explanation for the di¤erential e¤ect that the time horizon of interaction has on the extent of individual and group players?(non)conformity with subgame perfectness.
    JEL: C72 C92 L13
    Date: 2011–09
  12. By: Marco Tonello (Catholic University Milan & University of Milan-Bicocca)
    Abstract: This paper focuses on mechanisms of “peer interactions” among native and non-native students. We present a theoretical framework based on Lazear (2001) education production model and on the “sub-cultural” sociological theory and we test the theoretical predictions exploiting a dataset of Italian junior high school. Results show that non-native school share has small and negative impacts on Language test scores of natives’ peers, while it does not significantly affect Math test scores. The negative effects to natives’ attainment are concentrated in schools characterized by low levels of non-natives’ isolation or where non-natives’ school share is above 10%.
    Keywords: Peer effects, native and non-native students, social interactions
    JEL: J15 I21 I28
    Date: 2011
  13. By: Mehmet Y. Gurdal; Ayca Ozdogan; Ismail Saglam
    Date: 2011–10
  14. By: Pennings, Joost M.E.; Garcia, Philip; Irwin, Scott H.
    Abstract: Heterogeneity, i.e., the notion that individuals respond differently to economic stimuli, can have profound consequences for the interpretation of behavior and the formulation of agricultural policy. This paper compares and evaluates three grouping techniques that can be used to account for heterogeneity in financial behavior. Two are well established: company-type grouping and cluster analysis. A third, the generalized mixture regression model, has recently been developed and is worth considering as market participants are grouped such that their response to the determinants of economic behavior is similar. We evaluate the grouping methods in a hedging framework by assessing their ability to reflect relationships consistent with theory. The empirical findings show that the economic relationships are more consistent with theory within the groups identified by the mixture model, and suggest that researchers interested in identifying segments of the population in which participants behave in a similar manner may consider using of mixture model in the presence of heterogeneity in financial behavior.
    Keywords: economic behavior, heterogeneity, hedging, methods, Risk and Uncertainty, A10, B40, C1, D0, G0, L2, Q13,
    Date: 2011–08–02
  15. By: Murray, Catherine
    Abstract: Regional Councils are primarily responsible for environmental management, as specified in the Resource Management Act (RMA), 1991. The Local Government Act 2002 has an integrative component, requiring consideration of social, economic, environmental and cultural well-being of their communities. These two Acts are interesting, as their combination is shaping new governance structures within New Zealand. Different types of policy instruments are available to Regional Councils while carrying out their functions: regulatory, economic and voluntary. The 1990s are characterized by âfirst generation Plansâ of the RMA, which were highly rule focused. In the 2000s a marked shift occurred, mainstreaming âcommunityâ and participative approaches to policy. This increased levels of trust between communities and the Regional Councils, and can be seen as building blocks in the formation of social capital. Where rules were not achieving particular policy objectives, interesting new hybrid forms of governance emerged. This paper looks at these newly-formed partnership approaches in New Zealand. The paper traces the emergence of partnerships as a collective form of action, and analyses them from an economic governance perspective. In so doing, the fundamental role of social capital is explained, as a rational economic concept. Regional Councils are centrally placed to anchor partnerships and strengthen their formation, hence strengthening social networks within the regions. The issue of riparian management is explored as a case study to inform how this could occur.
    Keywords: Community/Rural/Urban Development, Institutional and Behavioral Economics,
    Date: 2011
  16. By: Bougherara, Douadia; Gassmann, Xavier; Piet, Laurent
    Abstract: We designed a field experiment involving real payments to elicit farmersâ risk preferences. Farmers are a very interesting sample to study since risk has always played an important role in agricultural producersâ decisions. Besides, European farmers may face more risky situations in the future. In this context, it is very important for any economic analysis focusing on agriculture to correctly assess farmersâ behaviour in the face of different sources of risk. We test for two descriptions of farmersâ behaviour: expected utility and cumulative prospect theory. We use two elicitation methods based on the procedures of Holt and Laury (2002) and Tanaka et al. (2010) on a sample of 30 French farmers. The experiment consists in asking subjects to make series of choices between two lotteries with varying probabilities and outcomes. We estimate parameters describing farmersâ risk preferences derived from structural models. We find farmers are slightly risk averse in the expected utility framework. In the cumulative prospect theory frame, we find farmers display either loss aversion or probability weighting, tending to overweight small probabilities and to underweight high probabilities. In our study, expected utility is not a good description of farmersâ behaviour towards risk.
    Keywords: Risk Attitudes, Field Experiment, Farming, Risk and Uncertainty, C93, D81, Q10,
    Date: 2011
  17. By: Moreira, Helmar Nunes; Araujo, Ricardo Azevedo
    Abstract: In this paper it is shown that an extended evolutionary system proposed by Hofbauer and Sigmund (1998) may be transformed into a Kukles system. Then a Dulac-Cherkas function related to the Kukles system is derived, which allows us to determine the number of limit cycles or its non-existence.
    Keywords: limit cycles; evolutionary game theory; Kukles system; Dulac-Cherkas function
    JEL: C02 C73
    Date: 2011
  18. By: Wieland Mueller; Eline van der Heijden; Tobias J. Klein; Jan Potters
    Abstract: We elicit time preferences of a representative sample of 1,102 Dutch individuals and also confront them with a series of incentivized investment decisions. There are two treatments which di¤er by the frequency at which individuals decide about the invested amount. The low frequency treatment provides a nudge by stimulating decision makers to frame a sequence of risky decisions broadly rather than narrowly. We ?nd that impatient individuals are more ?nudgeable? than patient ones as the e¤ect of the treatment on investment levels is signi?cantly larger within the group of high discounters than within the group of low discounters. This result is robust to controlling for various economic and demographic variables and cognitive ability. This ?nding is interesting from a policy perspective because impatient individuals are often the target group of nudges as impatience is associated with problematic behaviors such as low savings, little equity holdings, low investments in human capital, and an unhealthy lifestyle.
    JEL: C93 D81
    Date: 2011–09

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