nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2012‒09‒30
twenty-two papers chosen by
Matthew Baker
City University of New York

  1. Trust and Trustworthiness under the Prospect Theory: A field experiment in Vietnam By Quang Nguyen; Marie-Claire Villeval; Hui Xu
  2. Social and Moral Norms in the Laboratory By Charness, Gary; Schram, Arthur
  3. From Imitation to Collusion: Long-run Learning in a Low-Information Environment By Simon Weidenholzer; Daniel Friedman; Steffen Huck; Ryan Oprea
  4. Do I Care if You Know I Betrayed You? By James C. Cox; Danyang Li
  5. Incentives and Group Identity By Masella, Paolo; Meier, Stephan; Zahn, Philipp
  6. Efficiency, Team building, and Spillover in a Public-goods Game By Charness, Gary
  7. Pro-poor Service Delivery and Social Identity: An Experimental Investigation By Mueller, Ulrike
  8. The Economic Impact of Anti-Social Preferences in a Multi-Period Game with Attacks and Insurance By Philip J. Grossman; Mana Komai
  9. Continuous Time and Communication in a Public-goods Experiment By Charness, Gary; Oprea, Ryan; Friedman, Dan
  10. Level-k reasoning and incentives By Larbi Alaoui; Antonio Penta
  11. The Impact of Random Help on the Dynamics of Indirect Reciprocity By Charlotte Klempt
  12. Preferences for Redistribution : Normative Rationality, Self-Interest and Social Identification By Christine Le Clainche; Jérôme Wittwer
  13. Mistakes, Closure and Endowment Effect in Laboratory Experiments By Anmol Ratan
  14. Evolving to the impatience trap: the example of the farmer-sheriff game By David K. Levine; Salvatore Modica; Federico Weinschelbaum; Felipe Zurita
  15. Conflict and the evolution of societies By David K. Levine; Salvatore Modica
  16. Trust and trustworthiness with singleton groups By Fabio Galeotti; Daniel John Zizzo
  17. Social context and fairness perceptions: The role of status By Albrecht, Konstanze; von Essen, Emma; Falk, Armin; Fliessbach, Klaus; Ranehill, Eva
  18. Risk Aversion and Religion By Noussair, C.N.; Trautmann, S.T.; Kuilen, G. van de; Vellekoop, N.
  19. Are social and entrepreneurial attitudes compatible? A behavioral and self-perceptional analysis By Iván Arribas; Penélope Hernández; Amparo Urbano Salvador; Jose E. Vila
  20. The Dark Side of Competition for Status By Charness, Gary; Masclet, David; Villeval, Marie Claire
  21. Letting Down the Team? Social Effects of Team Incentives By Babcock, Philip; Bedard, Kelly; Charness, Gary; Hartman, John; Royer, Heather
  22. Liberty and the post-utilitarian society By Saint-Paul, Gilles

  1. By: Quang Nguyen (Nanyang Technological University, 14 Nanyang Drive, Singapore 637332, Singapore); Marie-Claire Villeval (University of Lyon, F-69007, France; GATE, CNRS, 93, Chemin de Mouilles, F-69130, Ecully, France; IZA, Bonn, Germany); Hui Xu (University of Lyon, F-69007, France; GATE, CNRS, 93, Chemin de Mouilles, F-69130, Ecully, France)
    Abstract: We study the influence of risk and time preferences on trust and trustworthiness by conducting a field experiment in Vietnamese villages and by estimating the parameters of the Cumulative Prospect Theory and of quasi-hyperbolic time preferences. We find that while probability sensitivity or risk aversion do not affect trust, loss aversion influences trust indirectly by lowering the expectations of return. Also, more risk averse and less present biased participants are found to be trustworthier. The experience of receiving remittances influences behavior and a longer exposure to a collectivist economy tend to reduce trust and trustworthiness.
    Keywords: Trust, trustworthiness, risk preferences, time preferences, Cumulative Prospect Theory, Vietnam, field experiment
    JEL: C91 C93 D81 D90
    Date: 2012
  2. By: Charness, Gary; Schram, Arthur
    Abstract: Social norms involve observation by others and external sanctions for violations,while moral norms involve introspection and internal sanctions. We develop a simple model ofindividual preferences that incorporates moral and social norms. We then examine dictatorchoices, where we create a shared understanding by providing advice from peers with nofinancial payoff at stake. We vary whether advice is given, as well as whether choices are madepublic. This design allows us to explicitly separate the effects of moral and social norms. Wefind that choices are in fact affected by a combination of observability and the sharedunderstanding.
    Keywords: Economics, General, Economics, Other, experiment, social norms, moral norms, individual preferences, dictator choices
    Date: 2012–02–05
  3. By: Simon Weidenholzer; Daniel Friedman; Steffen Huck; Ryan Oprea
    Abstract: We study long-run learning in an experimental Cournot game with no explicit information about the payo function. Subjects see only the quantities and payos of each oligopolist after every period. In line with theoretical predictions and previous experimental ndings, duopolies and triopolies both reach highly competitive levels, with price approaching marginal cost within 50 periods. Using the new ConG software, we extend the horizon to 1,200 periods, far beyond that previously investigated. Already after 100 periods we observe a qualitative change in behavior, and quantity choices start to drop. Without pausing at the Cournot-Nash level quantities continue to drop, eventually reaching almost fully collusive levels in duopolies and often reaching deep into collusive territory for triopolies. Fitted models of individual adjustment suggest that subjects switch from imitation of the most protable rival to other behavior that, intentionally or otherwise, facilitates collusion via eective punishment and forgiveness. Remarkably, subjects never learn the best-reply correspondence of the one-shot game. Our results suggest a new explanation for the emergence of cooperation.
    Date: 2012–07–19
  4. By: James C. Cox; Danyang Li
    Abstract: It has been reported that betrayal aversion in influences the trust decision (Bohnet and Zeckhauser 2004; Bohnet et al. 2008). This paper adds to the literature by examining how concern for others' disutility from betrayal can affect the decision to repay trust. We compare trustees' behavior when betrayal is obfuscated to an identical monetary payoffs situation where betrayal is revealed. We find that more trustees choose to defect in our experiment when betrayal is obfuscated than when it is revealed. Our result suggests that concern for betrayal costs influences not only the decision to trust but also the decision to repay trust.
    Keywords: Experiments, Betrayal Cost, Trust, Cooperation
    JEL: C72 C91
    Date: 2012–09
  5. By: Masella, Paolo (University of Mannheim); Meier, Stephan (Columbia University); Zahn, Philipp (University of Mannheim)
    Abstract: This paper investigates in a principal-agent environment whether and how group membership influences the effectiveness of incentives and when incentives can have “hidden costs”, i.e., a detrimental effect. We show experimentally that in all interactions control mechanisms can have hidden costs for reasons specific to group membership. In within-group interactions control has detrimental effects because the agent does not expect to be controlled and reacts negatively when being controlled. In between-group interactions, agents perceive control more hostile once we condition on their beliefs about principal's behavior. Our finding contributes to the micro-foundation of psychological effects of incentives.
    Keywords: crowding out, motivation, incentives, social preferences, social identity, trust, experiment
    JEL: C91 D03 Z13
    Date: 2012–08
  6. By: Charness, Gary
    Abstract: The notions of one’s social identity, group membership, and homophily have recentlybecome topics for economic theory and experiments. Yet, since people are members of manygroups (e.g., race, gender, handedness) what determines which identity or identities are the mostsalient in different environments? Further, how do these factors trade off against one’s financialinterest? We conduct public-goods experiments in which we permit endogenous group-formationand vary whether there is a team-building exercise and whether some people receive anendowment twice as much as others receive. We do see evidence that team identity affectsendogenous networks when there is only one endowment type; however, when both identities arepresent, high-endowment participants are strongly attracted to linking up with each other. Oneinteresting result is that the team-building exercise greatly increases the level of contributionwithout respect to whether one is linked to people from one’s team-building exercise.Apparently the positive feeling engendered by the group exercise spills over to participants whowere in another team; however, this is not the case when one group has been in a 4-person teamand the other four participants have not.
    Keywords: Economics, Other, Economics, General, experiment, identity, team building, homophily
    Date: 2012–05–04
  7. By: Mueller, Ulrike
    Abstract: India addressed the requirement for pro-poor service delivery in rural regions by introducing decentralization and affirmative action policies. In order to measure the social preferences of local decision makers, we conducted field experiments which simul
    Keywords: decentralization reforms, service delivery, in-group favouritism, field experiment, India
    Date: 2012
  8. By: Philip J. Grossman; Mana Komai
    Abstract: We report results from a multi-period game designed to stimulate anti-social preferences and to measure the cost of to a society with members who act on these preferences. There are a number of important features of our game that, while individually not unique, in total distinguish it from previous games used to examine anti-social preferences. The unique feature of our design is that it addresses the two negative effects of anti-social preferences: the wasteful expenditure of resources in an attempt to harm others and the wasteful use of resources by the targets of antisocial actions in an attempt to protect themselves. We report evidence of anti-social preferences; those who were less well-off attack those who were better off, but the pattern of attacks is more complicated than suggested by available theory. We find within class attacks to be the most common type of attack observed. Relative standing within a type seems to be the motivation. Rich players are motivated in their attacks by a desire to move up in ranking within their type, while the poor players are motivated in their attacks by a desire to avoid moving down in ranking within their type. Finally, as wasteful as attacks are, spending on protection against attacks, while individually rational, results in even more waste. Subjects purchased insurance at twice the rate of attacks. Within our laboratory society, players acting on their anti-social preferences reduce total economic welfare by approximately 20 per cent.
    Keywords: anti-social preferences, insurance, envy
    JEL: C91 D03 D6
    Date: 2012–09
  9. By: Charness, Gary; Oprea, Ryan; Friedman, Dan
    Abstract: We investigate the nature of continuous-time strategic interactions in public-goodsgames. In one set of treatments, four subjects make contribution decisions in continuous timewhile in another they make them only at discrete points of time. The effect of continuous timeis muted in public-goods games compared to simpler social dilemmas; the data suggest thatwidespread coordination problems are to blame. With a rich communication protocol, thesecoordination problems disappear and the median subject contributes fully to the public good,with no time decay. At the median, the same communication protocol is less than half aseffective in discrete time.
    Keywords: Economics, General, Economics, Other, public goods, voluntary contribution mechanism, continuous-time games
    Date: 2012–04–04
  10. 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 payoffs 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 payoffs 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
  11. By: Charlotte Klempt
    Abstract: Cooperation via indirect reciprocity uses a partner's reputation to enable subjects to direct help to those who cooperated themselves. As a partner's reputation provides information whether the partner helped a third party in the past or not, subjects can help those partners with a good reputation. Whereas help in former studies implied a denite monetary transfer to a third party, the present study explores the implica- tions for cooperation via indirect reciprocity if a helping decision does not necessarily involve a monetary transfer. The study employs a "repeated helping game" where a chance move determines whether help actually leads to a reward for the recipient or not. Hence, a good reputation may not coincide with a positive income for the third party. The experimental results show that, rstly, if a chance move determines the outcome of helping decisions, the information about the past decision of partners has a smaller eect on cooperation rates as compared to a situation where helping decisions denitely lead to rewards. This suggests that risk substantially inuences the dynamics of indi- rect reciprocity. Secondly, subjects only reciprocate the recipient's good reputation and disregard whether a good reputation also involves a benecial outcome for the third party. Here, ndings oppose those found in studies on direct reciprocity where both the player's good intentions or good will and the actual monetary amount transferred aect reciprocal back-givings.
    Keywords: Indirect reciprocity; Reputation; Cooperation
    JEL: C91 D8
    Date: 2012–09
  12. By: Christine Le Clainche; Jérôme Wittwer
    Abstract: This article studies the formation of preferences regarding redistribution. Its aim is to demonstrate how preferences for redistribution are influenced by individual beliefs on the origins of social inequality and public values. The first section shows, through a microeconomic model, how preferences on redistribution can be understood as the outcome of “normative rationality” depended on beliefs concerning individual responsibility in the creation of inequality. This model is then confronted with empirical field data demonstrating the link between individuals’ normative beliefs and judgments and their preferences for redistribution.[...]
    Date: 2012–09
  13. By: Anmol Ratan
    Abstract: In this paper, we relax the hard closure property of experiments that have been used to study endowment effect in laboratory. We study differences in benchmark environments (hard closure) and an environment that allows participants to reverse the decisions taken in the laboratory (soft closure). We find that “endowment effect†is not observed in the soft closure treatment. The procedures in our experiment allow us to circumvent the critique of altered expectations. Our results call for a careful interpretation of experiments that suggest “endowment effect†in laboratory conditions. Other implications pertain to external validity of experiments with hard closure.
    Keywords: prospect-theory, endowment effect, reference-dependence, loss aversion, lab experiments,field experiments, external validity
    JEL: C91 C93 D81
    Date: 2012–09
  14. By: David K. Levine; Salvatore Modica; Federico Weinschelbaum; Felipe Zurita
    Abstract: The literature on the evolution of impatience, focusing on one-person decision problems, finds that evolutionary forces favor the more patient individuals. This paper shows that in the context of a game, this is not necessarily the case. In particular, it offers a two- population example where evolutionary forces favor impatience in one group while favoring patience in the other. Moreover, not only evolution but also efficiency may prefer impatient individuals. In our example, it is efficient for one population to evolve impatience and for the other to develop patience. Yet, evolutionary forces move the wrong populations.
    Keywords: Microeconomics
    Date: 2012
  15. By: David K. Levine; Salvatore Modica
    Abstract: The Malthusian theory of evolution disregards a pervasive fact about human societies: they expand through conflict. When this is taken account of the long-run favors not a large population at the level of subsistence, nor yet institutions that maximize welfare or per capita output, but rather institutions that maximize free resources. These free resources are the output available to society after deducting the payments necessary for subsistence and for the incentives needed to induce pro- duction, and the other claims to production such as transfer payments and resources absorbed by elites. We develop the evolutionary underpinnings of this model, and examine the implications of free resource maximization for the evolution of societies in several applications. Since free resources are increasing both in per capita income and population, evolution will favor large rich societies. We will show how technological improvement is likely to increase per capita output as well as increase population, and how economically inefficient institutions such as bureaucracy arise.
    Keywords: Demography ; Economic conditions
    Date: 2012
  16. By: Fabio Galeotti (School of Economics, University of East Anglia); Daniel John Zizzo (School of Economics, University of East Anglia)
    Abstract: We present an experiment investigating the effects of having an individual identified as a singleton group. The presence of a singleton group reduces trustworthiness. The majority group members discriminate against the singled out group member when they are not responsible of the distinct status of this person. When the singleton group member is identified based on negative characteristics, he or she returns significantly less. Overall, having singleton groups has no benefits for trust and is potentially disruptive for trustworthiness.
    Keywords: Justification, trust games, groups, responsibility
    JEL: C72 C91 Z13
    Date: 2012–02–01
  17. By: Albrecht, Konstanze (University of Bonn, Germany); von Essen, Emma (Dept. of Economics, Stockholm University); Falk, Armin (University of Bonn, Germany); Fliessbach, Klaus (University of Bonn, Germany); Ranehill, Eva (University of Zurich, Switzerland)
    Abstract: This study investigates how induced relative status affects fairness perceptions measured by satisfaction from different relative payoffs. We find that participants with lower status are less dissatisfied with disadvantageous payoff inequalities than equal or higher status participants. In contrast, when receiving an advantageous payoff, status does not influence satisfaction. Our findings suggest that relative social status has important implications for the acceptance of income inequalities.
    Keywords: status; fairness perceptions; satisfaction
    JEL: A13 C91 D31 D63
    Date: 2012–07–19
  18. By: Noussair, C.N.; Trautmann, S.T.; Kuilen, G. van de; Vellekoop, N. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: Using a dataset for a demographically representative sample of the Dutch population, containing a revealed preference risk attitude measure, as well as very detailed information about participants’ religious background, we study three issues raised in previous literature. First, we find strong confirmatory evidence that more religious people, as measured by church membership or attendance, are more risk averse. Second, we obtain some evidence that Protestants are more risk averse than Catholics. Third, our data suggest that the link between risk aversion and religion is driven by social aspects of church membership, rather than by religious beliefs themselves.
    Keywords: risk aversion;religion;Catholicism;Protestantism.
    JEL: C91 C93 D81 Z12
    Date: 2012
  19. By: Iván Arribas (ERI-CES); Penélope Hernández (ERI-CES); Amparo Urbano Salvador (ERI-CES); Jose E. Vila (ERI-CES)
    Abstract: Purpose – The aim of this paper is to analyze the compatibility between entrepreneurial and social attitudes. Specifically, we analyze if subjects with a more developed economic entrepreneurial attitude exhibit a less social attitude. Design/methodology/approach – Our methodology integrates an economic experimental approach with a standard entrepreneurial intention questionnaire to analyze the interaction between entrepreneurial and social self-perceptions and behavior. Findings – There is empirical evidence that experimental entrepreneurial behavior (characterized by detecting an opportunity and accepting risk to take an economic advantage from it in laboratory experiments) reduces the incentive for social behavior. However, this effect does not appear if just self-perceptions instead of experimental behaviors are considered. Research limitations/implications – The social attitude of entrepreneurs may be overestimated in those empirical research studies based only on data obtained from entrepreneurs’ answers to hypothetical questions in a survey. Originality/value - To the best of our knowledge, this is the first paper presenting a laboratory experiment to represent the key features of entrepreneurial behavior instead of a case-control analysis to set differences in the experimental behavior of sub-samples of subjects defined in terms of their entrepreneurial motivation or experience.
    Keywords: Social entrepreneur, experimental behavioral economics, risk
    Date: 2012–09
  20. By: Charness, Gary; Masclet, David; Villeval, Marie Claire
    Abstract: Unethical behavior within companies is not rare. We investigate experimentally therole of status-seeking behavior in sabotage and cheating activities aiming at improving one’sperformance ranking in a flat-wage environment. We find that average effort is higher whenindividuals are informed about their relative performance. However, ranking feedback alsofavors disreputable behavior. Some individuals do not hesitate to incur a cost to improve theirrank by sabotaging others’ work or by increasing artificially their own performance. Introducingsabotage opportunities has a strong detrimental effect on performance. Therefore, rankingincentives should be used with care. Inducing group identity discourages sabotage among peersbut increases in-group rivalry.
    Keywords: Economics, Other, Economics, General, status, ranking, feedback, sabotage, doping, competitive preferences, experiment
    Date: 2012–07–18
  21. By: Babcock, Philip; Bedard, Kelly; Charness, Gary; Hartman, John; Royer, Heather
    Abstract: This paper estimates social effects of incentivizing people in teams. In two fieldexperiments featuring exogenous team formation and opportunities for repeated socialinteractions, we find large team effects that operate through social channels. The teamcompensation system induced agents to choose effort as if they valued a marginal dollar ofcompensation for their teammate from two-thirds as much (in one study) to twice as much asthey valued a dollar of their own compensation (in the other study). We conclude that socialeffects of monetary team incentives exist and can induce effort at lower cost than through directindividual payment.
    Keywords: Economics, General, Economics, Other, Applied Economics, field experiment, team incentives, social effects
    Date: 2012–08–10
  22. By: Saint-Paul, Gilles (TSE)
    Abstract: Utilitarian foundations for limited government are shaky insofar as they assume rational and consistent individuals. Recently economists’ assumption of rational actors has come under sustained attack. Behavioural economics has suggested that people are plagued by irrational biases and inconsistencies. The author elucidates how these developments have led to a post-utilitarianism which is held to justify paternalistic interventions by the state via ‘sin taxes’ , direct bans or new obligations. Individual responsibility is seriously undermined, as is faith in markets. He concludes that supporters of individual freedom need to move away from utilitarian reasoning, reassert core values of autonomy and responsibility, and define strict limits on the scope of government intervention.
    Keywords: behavioural economics, utilitarianism, government, paternalism
    Date: 2012–09

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