nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2012‒10‒13
ten papers chosen by
Matthew Baker
City University of New York

  1. Retaliation and the Role for Punishment in the Evolution of Cooperation By Irenaeus Wolff
  2. Cooperation, but no reciprocity: Individual strategies in the repeated Prisoner's Dilemma By Breitmoser, Yves
  3. Conflicts and social capital and economic development in Latin America By Paula Pavarina
  4. "My friends: it would be an error to accept": Communication and group identity in a bargaining setting By Alexander Elbittar; Andrei Gomberg
  5. Exploring the Capability to Backward Induct – An Experimental Study with Children and Young Adults By Jeannette Brosig-Koch; Timo Heinrich; Christoph Helbach
  6. Large Games with a Bio-Social Typology By M. Ali Khan; Kali P. Rath; Yeneng Sun; Haomiao Yu
  7. Life Expectancy, Labor Supply, and Long-Run Growth: Reconciling Theory and Evidence By Holger Strulik; Katharina Werner
  8. Sense making and information in an agent-based model of cooperation By Caterina Cruciani; Anna Moretti; Paolo Pellizzari
  9. Personality, Group Decision-Making and Leadership By Seda Ertac; Mehmet Y. Gurdal
  10. An Evolutionary CAPM Under Heterogeneous Beliefs By Carl Chiarella; Roberto Dieci; Xue-Zhong He; Kai Li

  1. By: Irenaeus Wolff
    Abstract: Models of evolutionary game theory have shown that punishment may be an adaptive behaviour in environments characterised by a social-dilemma situation. Experimental evidence closely corresponds to this nding but questions the cooperation-enhancing eect of punishment if players are allowed to retaliate against their punishers. This study provides a theoretical explanation for the existence of retaliating behaviour in the context of repeated social dilemmas and analyses the role punishment can play in the evolution of cooperation under these conditions. We show a punishing strategy can pave the way for a partially-cooperative equilibrium of conditional cooperators and defecting types and, under positive mutation rates, foster the cooperation level in this equilibrium by prompting reluctant cooperators to cooperate. However, when rare mutations occur, it cannot sustain cooperation by itself as punishment costs favour the spread of non-punishing cooperators.
    Keywords: Public goods, Prisoner's Dilemma, Strong reciprocity, Counterpunishment
    Date: 2012
  2. By: Breitmoser, Yves
    Abstract: A recent advance in our understanding of repeated PDs is the detection of a threshold d* at which laboratory subjects start to cooperate predictively. This threshold is substantially above the classic threshold "existence of Grim equilibrium" and has been characterized axiomatically by Blonski, Ockenfels, and Spagnolo (2011, BOS). In this paper, I derive its behavioral foundations. First, I show that the threshold is equivalent to existence of a "Semi-Grim" equilibrium s_cc>s_cd=s_dc>s_dd. It is cooperative (s_cc>0.5), non-reciprocal (s_cd=s_dc), and robust to imperfect monitoring ("belief-free"). Next, I show that the no-reciprocity condition s_cd=s_dc also follows from robustness to random-utility perturbations (logit equilibrium). Finally, I re-analyze strategies in four recent experiments and find that the majority of subjects indeed plays Semi-Grim when it is an equilibrium strategy, which explains d*'s predictive success.
    Keywords: Repeated Prisoner's Dilemma; experiment; equilibrium selection; cooperative behavior; reciprocity; belief-free equilibria; robustness
    JEL: C92 C73 C72
    Date: 2012–10–04
  3. By: Paula Pavarina
    Abstract: Conflicts and social capital and economic development in Latin America Keywords: social capital, economic development, conflict, cooperation. JEL CLASSIFICATION: O17; 043; O57. Abstract This study aims to discuss the economical behavior of Latin America, considering the importance of the attributes directly related to social capital (interpersonal trust, which leads to association and civic commitment, resulting in what Putnam calls 'civic community') pari passu governance, ie the formal attributes related to the behavior of economic agents in the presence of the state, which make up a 'backdrop' for the establishment of social, political and economic relations. Together, these two dimensions can enable to explain the economical behavior of conflict or cooperation in different countries. This is because the rational decision of cooperating or not is related to two factors: (1) the expected behavior of other agents ('I cooperate if and just if I hope the others will cooperate with me') and (2) the existence of standards, patterns or rules that prevent or hinder opportunism (otherwise the cooperative behavior would seem a 'fool’s choice'). The key question when added together the two dimensions is predictability. In other words, understanding the formal and informal 'rules of the game' and the reluctance in facing the penalties imposed in cases of wrongful conduct. The expected behavior of other agents depends on the trust relationships that are established between them. The more 'general trust' is (replacing the purely interpersonal attributes), it is expected more cooperation. The 'generalized trust' occurs when one recognizes itself in the other or when others are part of 'my group'. Hence the importance of activities that brings together a large and different number of people and groups, named 'bridging' associations, which allow the inter-relationship between 'different' individuals. The more social capital is reflected in the amount of cross-cutting relationships; bigger will be the advantages of economic environment. The lack of confidence or associative participation leads to a 'social isolationism' that is characteristic of places and countries where economic or social fragmentation can be find. This situation can lead to positive results that are appropriated by some groups in private but not by all the collectivity. Conflict occurs when different interests collide: either because they are isolated benefits or privately appropriated ones, gathered in the expense of others groups; or because the benefits are not extended to everybody because of the context of institutional weakness. Using quantitative analysis this paper analyses correlations between social capital and growth in Latin America as well as between GDP per capita and institutional conditions (political and civil liberties, property rights, stability of political power, judicial independence and the rule of law).
    Date: 2012–10
  4. By: Alexander Elbittar (Centro de Investigación y Docencia Económica (CIDE)); Andrei Gomberg (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))
    Abstract: In this paper we introduce communication into intergroup ultimatum bargaining in a lab. The responder groups vote whether to accept the proposals with unanimity required either for acceptance or for rejection. In contrast with the no-communication results reported in our previous study (Elbittar, Gomberg and Sour 2011), the group decision rule does affect the individual voting behavior when subjects are allowed to exchange messages before voting. In fact, when acceptance is the default, subjects become substantially more likely to vote to reject an offer. As a result, the formal group decision-making rule turns out to have little impact on group decisions, which follow the behavior of the more confronational subjects, as predicted by the "group discontinuity hypothesis" of the psychological literature.
    Keywords: Bargaining games, group decision making, communication and experiments
    JEL: C92 D44 D82
    Date: 2012
  5. By: Jeannette Brosig-Koch; Timo Heinrich; Christoph Helbach
    Abstract: We investigate learning and the development of the capability to backward induct in children and young adults aged 6 to 23 under controlled laboratory conditions. The experimental design employs a modified version of the race game. As in the original game (see Burks et al., 2009, Dufwenberg et al., 2010, Gneezy et al., 2010, and Levitt et al., 2011), subjects need to apply backward induction in order to solve the games. We find that subjects’ capability to backward induct improves with age, but that this process systematically diff ers across gender. Our repetition of the games provides insights into differences in learning between age groups and across gender.
    Keywords: Backward induction; learning; age effects; experimental economics; children
    JEL: C72 J13 C91
    Date: 2012–07
  6. By: M. Ali Khan (Department of Economics, Johns Hopkins University); Kali P. Rath (Department of Economics, University of Notre Dame); Yeneng Sun (Department of Economics, National University of Singapore); Haomiao Yu (Department of Economics, Ryerson University)
    Abstract: We present a comprehensive theory of large games in which players have names and determinate social-types and/or biological traits, and identify through four decisive examples, essentially based on a matching-pennies type game, pathologies arising from the use of a Lebesgue interval for player's names. In a sufficiently general context of traits and actions, we address this dissonance by showing a saturated probability space as being a necessary and sufficient name-space for the existence and upper hemi-continuity of pure-strategy Nash equilibria in large games with traits. We illustrate the idealized results by corresponding asymptotic results for an increasing sequence of finite games.
    Keywords: Large games, social-type, traits, idealized limit game, saturated probability space, pure-strategy Nash equilibrium, closed-graph property, upper hemi-continuity, asymptotic implementation
    JEL: C62 D50 D82 G13
    Date: 2012–10
  7. By: Holger Strulik; Katharina Werner
    Abstract: We set up a simple overlapping generation model that allows us to distinguish between life expectancy and active life expectancy. We show that individuals optimally adjust to a longer active life by educating more and, if the labor supply elasticity is high enough, by supplying less labor. When calibrated to US data the model explains the historical evolution of increasing education and declining labor supply (of cohorts born 1850-1950) as an optimal response to increasing active life expectancy. We integrate the theory into a unified growth model and reestablish increasing life expectancy as an engine of long-run economic development.
    Keywords: longevity, active life expectancy, education, hours worked, economic growth
    JEL: E20 I25 J22 O10 O40
    Date: 2012–09–18
  8. By: Caterina Cruciani (Department of Economics, Università Ca' Foscari Venezia); Anna Moretti (Department of Management, Università Ca' Foscari Venezia); Paolo Pellizzari (Department of Economics, Università Ca' Foscari Venezia)
    Abstract: This paper studies the profile of cooperation emerging in a context in which agents may choose to join one of two groups or stay on their own, in a world where similarity across peers matters. In particular, we investigate the role of heterogeneity in individual contributions, of the level of information and of in-group processes of convergence in values (sense making) in fostering higher levels of cooperation, assessed through higher participation rates to groups. Starting from the result that more heterogeneity reduces participation, we show that increasing the level of information available to subjects and activating sense-making dynamics are able to support higher cooperation levels, which, however, come at the cost of increased radicalization of agent types within group.
    Keywords: Similarity, Sense making, Cooperation, Groups
    JEL: B41 D74 D85
    Date: 2012–09
  9. By: Seda Ertac (Department of Economics, Koç University); Mehmet Y. Gurdal (Department of Economics, TOBB-ETU)
    Abstract: This paper explores the effect of personality traits on: (1) the willingness to make risk-taking decisions on behalf of a group, (2) the nature of "choice shifts", i.e. the difference between the amount of risk taken in the group context and individually. Openness and agreeableness emerge as significant determinants of the willingness to lead: non-leader women and non-leader men score lower on openness and higher in agreeableness compared to both leader men and leader women. Neuroticism explains the within-gender variance in individual risk-taking among women, who are on average more risk-averse than men. Subjects in general behave more cautiously when they are making risky decisions on behalf of a group. Among men, a higher agreeableness score implies higher caution in group decisions, while conscientiousness leads to less caution. In contrast, among women, a higher conscientiousness score implies higher caution in the group context, suggesting that the two genders might interpret the social norms in group decision-making differently.
    Keywords: Personality, leadership, gender, group decision-making, risk, choice shifts, experiments.
    JEL: C91 C92 D81 J16
    Date: 2012–10
  10. By: Carl Chiarella (Finance Discipline Group, UTS Business School, University of Technology, Sydney); Roberto Dieci (Department of Mathematics, University of Bologna); Xue-Zhong He (Finance Discipline Group, UTS Business School, University of Technology, Sydney); Kai Li (Finance Discipline Group, UTS Business School, University of Technology, Sydney)
    Abstract: Heterogeneity and evolutionary behaviour of investors are two of the most important characteristics of financial markets. This papers incorporates the adaptive behaviour of agents with heterogeneous beliefs and establishes an evolutionary capital asset pricing model (ECAPM) within the mean-variance framework. We show that the rational behaviour of agents switching to better performing trading strategies can cause large deviations of the market price from the fundamental value of one asset to spill over to other assets. Also, this spill-over effect is associated with high trading volumes and persistent volatility characterized by significantly decaying autocorrelations of, and positive correlation between, price volatility and trading volume.
    Keywords: evolutionary CAPM; heterogeneous beliefs; market stability; spill-over effects; volatility; trading volume
    JEL: D84 G12
    Date: 2012–10–01

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