nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2015‒01‒03
two papers chosen by
Matthew Baker
City University of New York

  1. Favorite-Longshot Bias in Parimutuel Betting: an Evolutionary Explanation By Atsushi Kajii; Takahiro Watanabe
  2. The Geographical Origins of Early State Formation By Anastasia Litina

  1. By: Atsushi Kajii (Institute of Economic Research, Kyoto University); Takahiro Watanabe (Tokyo Metropolitan University)
    Abstract: We offer an evolutionary explanation for the favorite-longshot bias in pari-mutuel betting, in a simple evolutionary market model. Because of a positive track take, the expected returns of any strategy stay negative and so any agent must vanish in the long run. Those who bet on favorites lose steadily whereas those who favor long shots have some chances of getting ahead with rare but large gains to survive longer. This relative advantage results in overvaluation of long shots.
    Date: 2014–12
  2. By: Anastasia Litina (CREA, Université du Luxembourg)
    Abstract: This research theoretically and empirically advances the hypothesis that in early stages of development, land and climatic variability had a persistent beneficial effect on the advent of early statehood. A high degree of land and climatic diversity, and its association with potential gains from trade, accentuated the incentives to develop social, political and physical infrastructure that could facilitate interregional interaction. Hence, the emergence of states was expedited in more diverse geographical environments. To explore the hypotheses the analysis exploits exogenous sources of variation in a) the measure of land variability across countries, and b) climatic variability within countries over the period 500-1500 CE. The research establishes that i) the advent of statehood was expedited in regions characterized by a higher degree of variability in land and climatic conditions, ii) the effect of (land and climatic) variability on statehood operates partly through the advancement of technologies associated with trade, thus suggesting that it is the pivotal role of states in facilitating trade that ultimately contributed to their emergence and consolidation, and, iii) the effect of land variability on statehood dissipates over time,
    Keywords: State Formation, Climatic Variability, Land suitability for agriculture
    JEL: O50 O57 N70
    Date: 2014

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