nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2012‒08‒23
fourteen papers chosen by
Matthew Baker
City University of New York

  1. Taking, Punishment and Trust By Simon Halliday
  2. A Test Of Social Preferences Theory By Ioannou, Christos A.; Qi, Shi; Rustichini, Aldo
  3. Cooperation in a Risky Environment: Decisions from Experience in a Stochastic Social Dilemma By Florian Artinger; Nadine Fleischhut; M. Vittoria Levati; Jeffrey R. Stevens
  4. Giving in Dictator Games - Experimenter Demand Effect or Preference over the Rules of the Game? By Nadine Chlaß; Peter G. Moffatt
  5. Motives of Sanctioning: Equity and Emotions in a Public Good Experiment with Punishment By Paolo Crosetto; Werner Güth; Luigi Mittone; Matteo Ploner
  6. A New Stationary Game Equilibrium Induced by Stochastic Group Evolution and Rational Individual Choice By Dai, Darong; Shen, Kunrong
  7. Trust and Arena Size. Expectations, Trust, and Institutions Co-Evolving, and Their Critical Population and Group Sizes. By Elsner, Wolfram; Schwardt, Henning
  8. Toward the Integration of Personality Theory and Decision Theory in the Explanation of Economic and Health Behavior By Rustichini, Aldo; DeYoung, Colin G.; Anderson, Jon; Burks, Stephen V.
  9. Competition, cooperation, and collective choice By Thomas Markussen; Ernesto Reuben; Jean-Robert Tyran
  10. Combining Psychology and Economics in the Analysis of Compliance: From Enforcement to Cooperation By Erich Kirchler; Stephan Muehlbacher; Katharina Gangl; Eva Hofmann; Christoph Kogler; Maria Pollai; James Alm
  11. Bounded rationality: psychology, economics and the financial crisis By Schilirò, Daniele
  12. Level-k Reasoning and Incentives By Larbi Alaoui; Antonio Penta
  13. Who replaces whom? Local versus non-local replacement in social and evolutionary dynamics By Sven Banisch; Tanya Araujo
  14. Does Religiosity Promote Property Rights and the Rule of Law? By Berggren, Niclas; Bjørnskov, Christian

  1. By: Simon Halliday
    Abstract: Is a trusting person more or less likely to steal? Is a trusting person more or less likely to punish someone who steals? A great deal of research has examined how trust and social capital correlate with altruistic, reciprocal and punishing behaviours, but less research has been dedicated to understanding the roles of trust and social capital in peoples' choices between a strictly antisocial behaviour - like stealing - and generosity, or in a third party's choice to punish taking behaviour. Using a series of dictator games with third-party punishment and an option for a dictator to take, we show that trust plays a strong role in dictator behaviour and third-party behaviour. For dictators, trust correlates with the probability that the dictator refrains from self-interested behaviour and it correlates with the amount the dictator offers to their partner. For third parties, trust correlates with a third party's choice to punish self-interested behaviour and it correlates with the amount a third party spends on punishment. Social capital does not produce any such robust results.
    Keywords: Social Norms, Punishment, Reciprocity, Social Preferences, Trust, Social Capital.
    JEL: C72 C91
    Date: 2012–08
  2. By: Ioannou, Christos A.; Qi, Shi; Rustichini, Aldo
    Abstract: Theories of social preferences assume that individuals have a utility over monetary outcome profiles, that depends on their and other players' payments. Behavior in strategic interactions is explained as a Nash equilibrium of the game where final payoffs are paid in these utility units. These theories predict the estimated preferences to be independent of the subject's position in the game if in the experiment the allocation to a role is randomly determined, since subjects in each role have the same preferences ex-ante. We test and reject this hypothesis. We use the Quantal Response Equilibrium (QRE) of McKelvey and Palfrey (1995) to study first mover behavior in the Trust game. As standard in this literature we assume that first mover beliefs are consistent with the observed probability distribution of actions of the second movers. On the other hand, second mover behavior can be extrapolated without any a priori rational expectation assumptions. Our results show that the estimated preferences of first movers attach a significantly higher weight to their own payoff compared to the weight attached by second movers on their own payoff. This finding is inconsistent with the assumption that subjects approach a game with the same (that is, independent of the allocation to roles in the game) ex-ante preferences over monetary outcome profiles.
    Date: 2012–06–08
  3. By: Florian Artinger (Max Planck Institute for Human Development, Berlin); Nadine Fleischhut (Max Planck Institute for Human Development, Berlin); M. Vittoria Levati (Max Planck Institute of Economics, Jena, and Department of Economics, University of Verona); Jeffrey R. Stevens (Department of Psychology, Nebraska)
    Abstract: Often in cooperative situations, many aspects of the decision-making environment are uncertain. We investigate how cooperation is shaped by the way information about risk is presented (from description or from experience) and by differences in risky environments. Drawing on research from risky choice, we compare choices in stochastic social dilemmas to those in lotteries with equivalent levels of risk. Cooperation rates in games vary with different levels of risk across decision situations with the same expected outcomes, thereby mimicking behavior in lotteries. Risk presentation, however, only affected choices in lotteries, not in stochastic games. Process data suggests that people respond less to probabilities in the stochastic social dilemmas than in the lotteries. The findings highlight how an uncertain environment shapes cooperation and call for models of the underlying decision processes.
    Keywords: Decisions from Experience, Social Dilemma, Cooperation, Risky Choice, Public Good.
    JEL: C72 C73 C92 D81
    Date: 2012–08–20
  4. By: Nadine Chlaß (School of Economics and Business Administration FSU Jena); Peter G. Moffatt (University of East Anglia, UK)
    Abstract: Traditionally, giving in dictator games was assumed to signal preferences over others' payoffs. To date, several studies find that dictator game giving breaks down under conditions designed to increase dictators' anonymity or if an option to take money obscures the purpose of the task. Giving is therefore argued to result from an experimenter demand effect. Here, we put this new interpretation to a stress test and find evidence that dictators mean to compensate the recipient for her vulnerable position in the game. Our results explain why giving decreases under specific conditions designed to increase anonymity and why the same individual may signal very different other-regarding preferences across different rules and/or roles of a game (Blanco et al. 2011).
    Keywords: altruism, dictator games, moral preferences, experimenter demand effect
    JEL: C91 D63 D64
    Date: 2012–07–23
  5. By: Paolo Crosetto (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); Luigi Mittone (Department of Economics - CEEL, University of Trento, Italy); Matteo Ploner (Department of Economics - CEEL, University of Trento, Italy)
    Abstract: We study conditional cooperation based on a sequential two-person linear public good game in which a trusting first contributor can be exploited by a second contributor. After playing this game the first contributor is allowed to punish the second contributor. The consequences of sanctioning depend on the treatment: whereas punishment can reduce inequality in one treatment, it only creates another inequality in the other. To capture the effect of delay on punishment both treatments are run once with immediate and once with delayed punishment. Moreover, to investigate the effect of pure voice, all four treatments are also run in a virtual condition with no monetary consequences of punishment. Results show the emergence across all conditions of a strong norm of conditional cooperation. Punishment is generally low, it is higher when not delayed and it is not used to reduce inequality in payoffs. The main motive of sanctioning appears to be the need to punish a violation of the reciprocity norm, irrespective of monetary consequences.
    Keywords: Public good games, Punishment, Experiments, Conditional cooperation
    JEL: C70 C72 C92 H41
    Date: 2012–08–20
  6. By: Dai, Darong; Shen, Kunrong
    Abstract: In the present paper, a new approach to equilibrium selection for very general normal form games has been constructed by introducing stochastic optimal stopping theory into classical evolutionary game theory. That is, the new game equilibrium is induced by both stochastic group evolution and decentralized rational individual choice. Moreover, stability of the game equilibrium is confirmed from both time and space dimensions.
    Keywords: Stochastic replicator dynamics; Rational choice; Normal-form game; Stability
    JEL: C70 C62
    Date: 2012–01–15
  7. By: Elsner, Wolfram; Schwardt, Henning
    Abstract: We develop a formal approach to the emergence of institutionalized trust in the context of the evolution of cooperation, with a particular focus on the relevance of the size dimension of this process. While trust in general has been widely investigated, as has the size dimension of structural emergence, both have rarely been analyzed together in an integrated approach to the co-evolution of institutions, trust, and the size of their populations and carrier groups. This then also helps explaining general(ized) trust. In a game-theoretic set-up, we determine critical levels of expectations as a factor facilitating the emergence of institutionalized cooperation in an arena, or population. Critical levels of expectations (to meet a cooperative agent) and arena size turn out to be interdependent. A carrier group, or platform, emerges under further conditions. It encompasses only a part of the larger population, indicating a maximum critical mass of cooperators (a meso-size) that can be sustained in a population, under an additional set of agency capabilities, particularly partner selection. Once cooperation has been established as the prevalent behavioral pattern in a number of platforms, its habituation as an institution may lead to a contingent perception of trustworthiness of agents. Habituated cooperation, its generalization, spillover or transfer across platforms, in combination with the perceived trustworthiness of others may lead to an increasing general trust level in the larger population. The approach chosen thus allows identifying critical factors of general trust among strangers in a larger population even in one-shot interactions. The significant differences observed in actual general-trust levels among countries, highly correlated with their macro performances, can be explained from the countries’ different (and mainly ‘inner’) size conditions in the deep structures of their interaction arenas and resulting platforms (rather than just total population size), contributing to the persistent varieties of capitalism.
    Keywords: cooperation; group size; habituation; trust
    JEL: B52 D83 C73
    Date: 2012
  8. By: Rustichini, Aldo (University of Minnesota); DeYoung, Colin G. (University of Minnesota); Anderson, Jon (University of Minnesota, Morris); Burks, Stephen V. (University of Minnesota, Morris)
    Abstract: Trait-based personality psychology and economics have taken different approaches to understanding individual differences, with the former emphasizing variables derived from the factor analysis of trait assessments, and the latter emphasizing variables derived from formal decision theory. In a data set on trainee truckers in a large US company, we provide a systematic initial assessment of the empirical pattern of relationships between the elements from these two approaches by comparing the predictive power of measurements derived from personality theory and decision theory for several individual characteristics and outcomes, and relating the two sets of measurements to each other. We show that personality traits have a comparable or stronger predictive power than do economic preferences for several dependent variables, including credit score, job persistence, and heavy truck accidents. They also have strong predictive power for Body Mass Index (BMI) and smoking status. Further, decision theory and personality variables are meaningfully related. For example, we confirm that cognitive ability explains a substantial part of time preferences, and find that Neuroticism and cognitive ability together explain attitudes toward risk. In addition, Agreeableness and cognitive ability explain aspects of other-regarding behavior in a strategic setting.
    Keywords: personality theory, decision theory, strategic behavior, credit score, smoking, obesity, prisoners' dilemma, job performance, heavy truck accident, truckload, turnover, trucker
    JEL: D83 C72 C93
    Date: 2012–07
  9. By: Thomas Markussen (Department of Economics); Ernesto Reuben (Columbia University and IZA); Jean-Robert Tyran (University of Vienna, University of Copenhagen, and CEPR)
    Abstract: The ability of groups to implement efficiency-enhancing institutions is emerging as a central theme of research in economics. This paper explores voting on a scheme of intergroup competition which facilitates cooperation in a social dilemma situation. Experimental results show that the competitive scheme fosters cooperation. Competition is popular but the electoral outcome depends strongly on specific voting rules of institutional choice. If the majority decides, competition is almost always adopted. If likely losers from competition have veto power, it is often not, and substantial gains in efficiency are foregone.
    Keywords: public goods; competition; tournament; cooperation; voting
    JEL: D72 J33 H41
    Date: 2012–05–01
  10. By: Erich Kirchler (Department of Applied Psychology: Work, Education and Economy, University of Vienna); Stephan Muehlbacher (Department of Applied Psychology: Work, Education and Economy, University of Vienna); Katharina Gangl (Department of Applied Psychology: Work, Education and Economy, University of Vienna); Eva Hofmann (Department of Applied Psychology: Work, Education and Economy, University of Vienna); Christoph Kogler (Department of Applied Psychology: Work, Education and Economy, University of Vienna); Maria Pollai (Department of Applied Psychology: Work, Education and Economy, University of Vienna); James Alm (Department of Economics, Tulane University)
    Abstract: In tax compliance research, there has been a significant shift in research emphasis from the analysis of enforcement to the incorporation of trust-building measures that encourage cooperation. In this paper, we trace this shift. We first describe the four major "actors" in the tax compliance game and their complex interactions: taxpayers, elected government officials, appointed tax authorities (or the tax administration), and tax accountants. Second, we examine various perspectives on what determines the compliance decisions of individuals. We start with "economic" factors that are based on tax compliance as an individual decision under risk (e.g., audits and fines). We then move to factors based more on "psychology", like social norms, fairness, and interactions both between taxpayers and between taxpayers and the government. Indeed, over the past few decades the view of taxpayers has shifted from one in which an authoritarian government and its tax authority force citizens to pay their taxes under the threat of punishment, to a view in which both elected and appointed authorities provide the necessary services to enable compliance, and even more recently to a view of authorities and citizens cooperating with one another. Third, we present the "slippery slope" framework as a way of integrating economic and psychological aspects into a unified framework. We conclude with recommendations based on this framework that can improve compliance.
    Keywords: tax evasion, behavioral economics, social norms, "slippery slope"
    JEL: H26 D03
    Date: 2012–07
  11. By: Schilirò, Daniele
    Abstract: Classical mathematical algorithms often fail to identify in time when the international financial crises occur although, as the classical theory of choice would suggest, the economic agents are rational and the markets are or should be efficient and behave also rationally. This contribution does not pretend to give a complete answer to these questions, but it will highlight some well-known limits of the classical theory of rational choice. In particular, the present paper will focus on the concept of bounded rationality. The work also makes some references to behavioral economics and to the literature of behavioral finance which has given important contributions in explaining the behavior and the anomalies of financial markets. Finally, following the approch of Simon, the paper proposes an analytical model to describe the behaviour of agents which are rationally bounded, risk averse and loss averse, emphasizing the relationship between psychology and economics which helps to explain the crisis in financial markets.
    Keywords: Bounded rationality; rational choice; cognitive economics; behavioral finance; risk aversion
    JEL: D81 B52 D83 C60
    Date: 2012–07
  12. By: Larbi Alaoui; Antonio Penta
    Abstract: Level-k theories are agnostic over whether individuals stop the iterated reasoning because of their own cognitive constraints, or because of their beliefs over the cognitive constraints of their opponents. In practice, individual level of play may be a function both of their own constraints and their beliefs over their opponents' reasoning process. Moreover, the rounds of introspection that players perform may depend on their incentives to think more deeply. We develop a theory which explicitly models players' reasoning procedure. The rounds of introspection that individuals perform and their actual level of play both follow endogenously. This model delivers testable implications as payoff s and opponents change, and it allows for comparisons across games. It also disentangles the cognitive bound of players for a given game from their beliefs about the play of their opponents. In conjunction with the framework, we present an experiment designed to test its predictions. We modify the Arad and Rubinstein (2012) '11-20' game to serve this precise purpose, and administer different treatments which vary beliefs over payoff s and opponents. The results of this experiment are consistent with the model, and appear to lend support to our theory. This experiment also confirms the central premise that individuals change their level of play as incentives to think more and beliefs over opponents vary.
    Keywords: beliefs, bounded rationality, cognitive cost, higher order beliefs, incentives, level-k reasoning, value of reasoning
    JEL: C72 C92 D80 D83
    Date: 2012–07
  13. By: Sven Banisch; Tanya Araujo
    Abstract: In this paper, we inspect well-known population genetics and social dynamics models, interacting individuals, while participating in self-organizing process, give rise to the emergence of complexe behaviors and patterns. While one main focus in population genetics is on the adaptive behavior of a population, social dynamics is more often concerned with the splitting of a connected array of individuals into a state of global polarization, that is, the emergence of speciation. Applying computational and mathematical tools we show that the way the mechanisms of selection, interaction and replacement are constrained and combined in the modelling have an inportant bearing on both adaptation and the emergence of specification. Differently (un)constraining the mechanism of individual replacement provides the conditions required for either speciation or adaptation, since these features appear as two opposing phenomena, not achieved by one and the same model. Even though natural selection, operating as an external, environmental mechanism, is neither necessary nor sufficient for the creation of speciation, our modelling exercises highlight the important role played by natural selection in the interplay of the evolutionary and the self-organization modeling methodologies.
    Keywords: Emmergence, self-organization, agent based models, speciation, Markov chains
    Date: 2012–07
  14. By: Berggren, Niclas (Research Institute of Industrial Economics (IFN)); Bjørnskov, Christian (Aarhus University)
    Abstract: Social and cultural determinants of economic institutions and outcomes have come to the forefront of economic research. We introduce religiosity, measured as the share for which religion is important in daily life, to explain institutional quality in the form of property rights and the rule of law. Previous studies have only measured the impact of membership shares of different religions, with mixed results. We find, in a cross-country regression analysis comprising up to 112 countries, that religiosity is negatively related to our institutional outcome variables. This only holds in democracies (not autocracies), which suggests that religiosity affects the way institutions work through the political process. Individual religions are not related to our measure of institutional quality.
    Keywords: Religion; Religiosity; Rule of law; Property rights; Institutions
    JEL: K11 K42 Z12
    Date: 2012–03–06

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