nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2013‒03‒30
five papers chosen by
Matthew Baker
City University of New York

  1. Tempered Best Response Dynamics By Dai Zusai
  2. Inequality and Relative Ability Beliefs By Jeffrey V. Butler
  3. Testing for Fictive Learning in Decision-Making under Uncertainty By Oliver Bunn; Caterina Calsamiglia; Donald J. Brown
  4. Schumpeter´s Gale: Mixing and compartmentalization in Economics and Biology By Friedrich, Thomas; Köpper, Wilhelm
  5. An epistemic characterization of generalized backward induction By Giacomo Bonanno

  1. By: Dai Zusai (Department of Economics, Temple University)
    Abstract: We propose a new deterministic evolutionary dynamic—the tempered best response dynamic (tBRD)---to capture two features of economic decision making: optimization and continuous sensitivity to incentives. That is, in the tBRD, an agent is more likely to revise his action when his current payoff is further from the optimal payoff, and he always switches to an optimal action when revising. The tBRD is a payoff monotone selection like the replicator dynamic, which makes medium and long-run outcomes more consistent with predictions from equilibrium refinement than the BRD in some situations. The technical contribution of the tBRD is continuous sensitivity, which allows us to apply results of a system of piecewise differential equations in order to obtain conditions for uniqueness and stability of solutions.
    Keywords: best response dynamic, payoff monotonicity, status-quo bias, switching costs, proper equilibrium, piecewise differential equations
    JEL: C62 C73 D03
    Date: 2013–01
  2. By: Jeffrey V. Butler (EIEF)
    Abstract: In this study I present experimental evidence of a novel channel yielding inequality persistence. In an initial experiment, results suggest that individuals respond to salient inequality by adjusting their performance beliefs to justify the inequality. Subsequent experiments reveal: i) that it is beliefs about relative ability, an ostensibly stable trait, rather than effort provision that respond to inequality; and that ii) unequal pay in an initial task affects willingness to compete on a subsequent task for male participants. Taken together, these patterns may cause inequality to become self-perpetuating. I conclude by discussing some implications of these findings.
    Date: 2013
  3. By: Oliver Bunn (Dept. of Economics, Yale University); Caterina Calsamiglia; Donald J. Brown (Dept. of Economics, Yale University)
    Abstract: We conduct two experiments where subjects make a sequence of binary choices between risky and ambiguous binary lotteries. Risky lotteries are defined as lotteries where the relative frequencies of outcomes are known. Ambiguous lotteries are lotteries where the relative frequencies of outcomes are not known or may not exist. The trials in each experiment are divided into three phases: pre-treatment, treatment and post-treatment. The trials in the pre-treatment and post-treatment phases are the same. As such, the trials before and after the treatment phase are dependent, clustered matched-pairs, that we analyze with the alternating logistic regression (ALR) package in SAS. In both experiments, we reveal to each subject the outcomes of her actual and counterfactual choices in the treatment phase. The treatments differ in the complexity of the random process used to generate the relative frequencies of the payoffs of the ambiguous lotteries. In the first experiment, the probabilities can be inferred from the converging sample averages of the observed actual and counterfactual outcomes of the ambiguous lotteries. In the second experiment the sample averages do not converge. If we define fictive learning in an experiment as statistically significant changes in the responses of subjects before and after the treatment phase of an experiment, then we expect fictive learning in the first experiment, but no fictive learning in the second experiment. The surprising finding in this paper is the presence of fictive learning in the second experiment. We attribute this counterintuitive result to apophenia: "seeing meaningful patterns in meaningless or random data." A refinement of this result is the inference from a subsequent Chi-squared test, that the effects of fictive learning in the first experiment are significantly different from the effects of fictive learning in the second experiment.
    Keywords: Uncertainty, Counterfactual outcomes, Apophenia
    JEL: C23 C35 C91 D03
    Date: 2013–03
  4. By: Friedrich, Thomas; Köpper, Wilhelm
    Abstract: Homogenization destroys biologic structures and social organizations or companies. Sometimes structure und sometimes mixing yields the highest productivity. Why and when will destruction be creative? We theoretically demonstrate in a simple enzyme ensemble of source and sink superadditivity and subadditivity by mixing or structured transfer (compartmentalization). Saturating production functions in combination with linear cost functions create besides superadditivity and subadditivity strong rationality and irrationality. Whenever a saturated source gives a costing substrate to an unsaturated sink where the substrate will be earning superadditivity of the ensemble of both will be observed. Such conditions characterize symbiosis and synergism. In antagonistic interactions (antibiosis) an earning substrate is taken from a source to be a costing substrate in a sink. Subadditivity will appear within the ensemble when the substrate will be more costing or less earning after the transfer. Only in superadditivity an active ensemble (with substrate transfer) will have superior productivity in comparison to an inactive ensemble (no transfer of substrate). Mixing is able to destroy irrational transfers reversing the role of source and sink. In life forms the transfer may be accompanied by brute force, a mirror of higher affinity in enzymes. The different outcomes are interrelated regions on a surface within a three dimensional transfer space or ensemble space.
    Keywords: ensemble; source; sink, superadditivity; subadditivity; Michaelis-Menten equation; mixing; compartmentalization
    JEL: C51
    Date: 2013–03–21
  5. By: Giacomo Bonanno (Department of Economics, University of California Davis)
    Abstract: We investigate the extension of backward-induction to von Neumann extensive games (where information sets have a synchronous structure) and provide an epistemic characterization of it. Extensions of the idea of backward-induction were proposed by Penta (2009) and later by Perea (2013), who also provided an epistemic characterization in terms of the notion of common belief in future rationality. The epistemic characterization we propose, although differently formulated, is conceptually the same as Perea's and so is the generalization of backward induction. The novelty of this contribution lies in the epistemic models that we use, which are dynamic, behavioral models where strategies play no role and the only beliefs that are specified are the actual beliefs of the players at the time of choice. Thus our analysis is free of (objective or subjective) counterfactuals.
    Keywords: Dynamic game, imperfect information, backward induction, belief, rationality, behavioral model
    JEL: C7
    Date: 2013–03–11

This nep-evo issue is ©2013 by Matthew Baker. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.