nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2014‒03‒08
ten papers chosen by
Matthew Baker
City University of New York

  1. Evolutionary Stability of Indirect Reciprocity by Image Scoring By Berger Ulrich; Ansgar Grüne
  2. Self-Confidence, Overconfidence and Prenatal Testorone Exposure: Evidence from the Lab By Dalton, P.S.; Ghosal, S.
  3. Gains from Sharing: Sticky Norms, Endogenous Preferences, and the Economics of Shareable Goods By Anders Fremstad
  4. Are groups 'less behavioral'? The case of anchoring By Meub, Lukas; Proeger, Till
  5. Fairness Through the Lens of Cooperative Game Theory: An Experimental Approach By Geoffroy De Clippel; Kareen Rozen
  6. No Two Experiments are Identical By Epstein, Larry G.; Halevy, Yoram
  7. Behavioral public choice: A survey By Schnellenbach, Jan; Schubert, Christian
  8. Kantian Optimization: An Approach to Cooperative Behavior By John E. Roemer
  9. The Economics of Human Development and Social Mobility By Heckman, James J.; Mosso, Stefano
  10. Behavioural Economics and Taxation By Till Olaf Weber; Jonas Fooken; Benedikt Herrmann

  1. By: Berger Ulrich (Department of Economics, Vienna University of Economics and Business); Ansgar Grüne
    Abstract: Indirect reciprocity describes a class of reputation-based mechanisms which may explain the prevalence of cooperation in groups where partners meet only once. The first model for which this has analytically been shown was the binary image scoring mechanism, where one's reputation is only based on one's last action. But this mechanism is known to fail if errors in implementation occur. It has thus been claimed that for indirect reciprocity to stabilize cooperation, reputation assessments must be of higher order, i.e. contingent not only on past actions, but also on the reputations of the targets of these actions. We show here that this need not be the case. A simple image scoring mechanism where more than just one past action is observed provides ample possibilities for stable cooperation to emerge even under substantial rates of implementation errors.
    Keywords: cooperation, prisoner's dilemma, donation game, indirect reciprocity, image scoring, first-order assessment, evolutionary stability, altruism
    JEL: C72 D83
    Date: 2014–02
  2. By: Dalton, P.S.; Ghosal, S. (Tilburg University, Center for Economic Research)
    Abstract: Abstract: This paper examines whether the degree of confi dence and overconfi dence in one's ability is determined biologically. In particular, we study whether foetal testosterone exposure correlates with an incentive-compatible measure of con fidence within an experimental setting. We fi nd that men (rather than women) who were exposed to high testosterone levels in their mother's womb are less likely to overestimate their actual performance, which in turn helps them to gain higher monetary rewards. Men exposed to low prenatal testosterone levels, instead, set unrealistically high expectations which results in self-defeating behavior. These results from the lab are able to recon- cile hitherto disconnected evidence from the fi eld, by providing a link between traders' overcon fidence bias, long-term financial returns and prenatal testosterone exposure.
    Keywords: 2D
    JEL: C91 D03 D87
    Date: 2014
  3. By: Anders Fremstad (University of Massachusetts-Amherst)
    Abstract: There are often "gains from sharing" underutilized goods with others. People routinely share tools, media, gear, electronics, toys, space, and vehicles with relatives, friends, and neighbors, and the internet is opening up new opportunities to share them with strangers. Drawing on the work of James Buchanan, Elinor Ostrom, and Yochai Benkler, I develop an economic framework of decentralized sharing. My analysis challenges the implications of simple economic models, which ignore the role of sticky norms and endogenous preferences and, therefore, suggest that people are always sharing at efficient levels. I argue that the online platforms may gradually transform norms and preferences to substantially increase peer-to-peer borrowing and lending. Using data from General Social Survey, the Consumer Expenditure Survey, the online platform NeighborGoods, and my own survey, I estimate the current and potential value of decentralized sharing. I find that today peer-to-peer borrowing is worth at least $179 a year for 30 percent of Americans and at least $774 for 8 percent of Americans. If the online platforms are able to facilitate high levels of sharing among loosely-tied individuals, the annual benefit to the average household would be modest but significant, perhaps one thousand dollars a year. My analysis suggests that that there are significant gains from sharing tools, media, gear, electronics, toys, pets, vacation homes, and lodging, but the largest gains will likely come from sharing privately-owned vehicles.
    Keywords: theory of clubs, theory of households, excludable non-rival goods, decentralized cooperation, reciprocity
    JEL: D10 D70 Q01
    Date: 2014
  4. By: Meub, Lukas; Proeger, Till
    Abstract: Economic small group research points to groups as more rational decision-makers in numerous economic situations. However, no attempts have been made to investigate whether groups are affected similarly by behavioral biases that are pervasive for individuals. If groups were also able to more effectively avoid these biases, the relevance of biases in actual economic contexts dominated by group decision-making might be questioned. We consider the case of anchoring as a prime example of a well-established, robust bias. Individual and group biasedness in three economically relevant domains are compared: factual knowledge, probability estimates and price estimates. In contrast to previous anchoring studies, we find groups to successfully reduce, albeit not eliminate, anchoring in factual knowledge tasks. For the other domains, groups and individuals are equally biased by external anchors. We thus suggest that group cooperation reduces biases prevalent on the individual level for predominantly intellective tasks, yet fails to improve decision-making when judgmental aspects are involved. --
    Keywords: anchoring bias,group decision-making,heuristics and biases,incentives,laboratory experiment
    JEL: C91 C92 D8
    Date: 2014
  5. By: Geoffroy De Clippel; Kareen Rozen
    Date: 2014–02–24
  6. By: Epstein, Larry G.; Halevy, Yoram
    Abstract: We study choice between bets on the colors of two balls, where one ball is drawn from each of two urns. Though you are told the same about each urn, you are told very little, so that you are not given any reason to be certain that the compositions are identical. We identify choices that reveal an aversion to ambiguity about the relation between urns, thus identifying a source of uncertainty different from the usual Knightian distinction between risk and ambiguity. Choice behavior is studied in a controlled high-stakes laboratory experiment, and the ability of new and existing models to rationalize the experimental findings is examined.
    Keywords: ambiguity, uncertainty, correlation, Ellsberg
    JEL: D81 D91
    Date: 2014–02–22
  7. By: Schnellenbach, Jan; Schubert, Christian
    Abstract: Public choice theory has originally been motivated by the need to correct the asymmetry, widespread in traditional welfare economics, between the motivational assumptions of market participants and policymakers: Those who played the game of politics should also be considered rational and self-interested. History repeats itself with the rise of behavioral economics: Cognitive biases discovered in market participants often induce a call for rational governments to intervene. Recently, however, behavioral economics has also been applied to the explanatory analysis of the political process. This paper surveys the current state of the emerging field of 'behavioral public choice' and considers the scope for further research. --
    Keywords: Behavioral Public Choice,Behavioral Economics,Rational Irrationality,Cognitive Biases,Social Norms,Voting,Paternalism
    JEL: D78 D03 A12 D72
    Date: 2014
  8. By: John E. Roemer
    Date: 2014–02–24
  9. By: Heckman, James J. (University of Chicago); Mosso, Stefano (University of Chicago)
    Abstract: This paper distills and extends recent research on the economics of human development and social mobility. It summarizes the evidence from diverse literatures on the importance of early life conditions in shaping multiple life skills and the evidence on critical and sensitive investment periods for shaping different skills. It presents economic models that rationalize the evidence and unify the treatment effect and family influence literatures. The evidence on the empirical and policy importance of credit constraints in forming skills is examined. There is little support for the claim that untargeted income transfer policies to poor families significantly boost child outcomes. Mentoring, parenting, and attachment are essential features of successful families and interventions to shape skills at all stages of childhood. The next wave of family studies will better capture the active role of the emerging autonomous child in learning and responding to the actions of parents, mentors and teachers.
    Keywords: capacities, dynamic complementarity, parenting, scaffolding, attachment, credit constraints
    JEL: J13 I20 I24 I28
    Date: 2014–02
  10. By: Till Olaf Weber (The University of Nottingham); Jonas Fooken (Joint Research Centre); Benedikt Herrmann (Joint Research Centre)
    Abstract: Most traditional tax policies have been based on classical economic models of tax payers as decision makers.As in many fields where humans make decision, however, more integrated behavioural economic models, that is, models that take into account both psychological and purely economic factors can provide further insights.Therefore, a large literature in the field on the behavioural economics of taxation exists. This report summarizes central parts of this literature, reviewing mainly experimental and observational studies in the academic literature to be informative for policy-makers. It also provides a potential agenda for future research and application of behavioural economic policies with regard to tax compliance.
    Keywords: Tax compliance, behavioural economics, economic experiments, survey
    JEL: D03 H26 H41
    Date: 2014–01

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