nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2015‒01‒26
four papers chosen by
Matthew Baker
City University of New York

  1. Non-cooperative games By van Damme, E.E.C.
  2. Long-Run Determinants of Intergenerational Transfers By John Karl Scholz; Ananth Seshadri; Kamil Sicinski
  3. Regulating the Environmental Consequences of Preferences for Social Status within an Evolutionary Framework By Eftichios Sartzetakis; Anastasios Xepapadeas; Athanasios Yannacopoulos
  4. Limited backward induction: foresight and behavior in sequential games By Marco Mantovani

  1. By: van Damme, E.E.C. (Tilburg University, Center For Economic Research)
    Abstract: We describe non-cooperative game models and discuss game theoretic solution concepts. Some applications are also noted. Conventional theory focuses on the question ‘how will rational players play?’, and has the Nash equilibrium at its core. We discuss this concept and its interpretations, as well as refinements (perfect and stable equilibria) and relaxations (rationalizability and correlated equilibria). Motivated by experiments that show systematic theory violations, behavioral game theory aims to integrate insights from psychology to get better answers to the question ‘how do humans play?’. We provide an overview of the observed regularities and briefly sketch (beginnings of) theories of boundedly rational play.
    Keywords: Backward induction; behavioral economics; correlated equilibrium; decision; experimental economics; game; game theory; incomplete information; noncooperative,; perfect equilibrium; rationality; rationalizability; sequential equilibrium; stable equilibrium
    JEL: C72 D03
    Date: 2014
  2. By: John Karl Scholz (University of Wisconsin-Madison); Ananth Seshadri (University of Wisconsin-Madison); Kamil Sicinski (University of Wisconsin-Madison)
    Abstract: Understanding whether the elderly are saving adequately is fundamental to understanding whether elderly households are able to maintain reasonable living standards. One factor that affects wealth accumulation is the extent to which parents need to support children and the extent to which children need to support parents. The presence of Social Security may affect intergenerational transfers, but the extent to which it ‘crowds out’ transfers from parents to children is controversial. The ideal dataset to analyze these issues would have detailed information on two or three generations and measures of long range outcomes of parents and their children. The Wisconsin Longitudinal Study (WLS) offers a possibility to analyze the impact of transfer patterns on wealth accumulation. We look at transfers over a long time period, informed by different theories of transfer behavior, as well as how cognitive skills and other attributes earlier in the life-cycle influence transfer and saving behavior later on in life. Long-term transfers are less equally distributed across siblings than short-term transfers, and the sum of transfers and inheritances is less equally distributed than transfers and inheritances alone. Transfers from parents-in-law are positive but statistically insignificantly correlated with the amount of transfers received from one’s own parents. Inter-vivos transfers from parents are not affected by transfers from parents-in-law. We find a strong positive association between the incidence of giving to own children and having received a gift from own parents, conditional on income and net worth.
    Date: 2014–09
  3. By: Eftichios Sartzetakis; Anastasios Xepapadeas; Athanasios Yannacopoulos
    Abstract: Taking as given that we are consuming too much and that overconsumption leads to environmental degradation, the present paper examines the regulator's choices between informative advertisement and consumptiontaxation. We model overconsumption by considering individuals that care about social status apart from the intrinsic utility, derived from direct consumption. We assume that there also exist individuals that care only about their own private consumption and we examine the evolution of preferences through time by allowing individuals to alter their behavior as a result of a learning process, akin to a replicator dynamics type.We consider the regulator's choice of consumption taxation and informative advertisement both in an arbitrary and an optimal control context. In the arbitrary overconsumption control context we find that the regulator could decrease, or even eliminate, the share of status seekers in the population. In the context of optimal overconsumption control, we show that the highest welfare is attained when status seekers are completely eliminated, while the lowest in the case that the entire population consists of status seekers.
    Keywords: status-seaking, replicator dynamics, information provision, environmental taxation
    JEL: Q53 Q58 D62 D82
    Date: 2015–01–19
  4. By: Marco Mantovani
    Abstract: The paper tests experimentally for limited foresight in sequential games. We develop a general out-of-equilibrium framework of strategic thinking based on limited foresight. It assumes the players take decisions focusing on close-by nodes, following backward induction – what we call limited backward induction (LBI). The main prediction of the model is tested in the context of a modified Game of 21. In line with the theoretical hypotheses, our results show most players think strategically only on close-by nodes without reasoning backwards from the end of the game. A small fraction of subjects play close to equilibrium, while few others try to exploit the limited foresight of their opponent. The results provide strong support for LBI, and cannot be accounted for using the most popular models of strategic thinking, let alone equilibrium analysis.
    Keywords: Behavioral game theory, sequential games, strategic thinking, level-k, limited foresight.
    JEL: D03 C72 C91
    Date: 2015–01

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