nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2015‒03‒13
five papers chosen by
Matthew Baker
City University of New York

  1. Population Dynamics and Long-Run Economic Growth By Casey, Gregory; Galor, Oded
  2. Cooperation and Trustworthiness in Repeated Interaction By Cagala, Tobias; Glogowsky, Ulrich; Grimm, Veronika; Rincke, Johannes
  3. Dynamic Games under Bounded Rationality By Zhao, Guo
  4. Behavioral Economics: A Maverick Guide By Hugh Schwartz
  5. Bounded rationality adn correlated equilibria By Fabrizio Germano; Peio Zuazo-Garin

  1. By: Casey, Gregory; Galor, Oded
    Abstract: This paper applies insights from theoretical and empirical research in economic growth to analyze the impacts of policies affecting fertility, migration and human capital accumulation on growth and poverty alleviation. It underlines the tradeoff between having more children and investing more resources in the human capital of each child as a critical force in devising policies that will alleviate hardship and generate long-term prosperity. In developing countries, policies increasing the return to education would trigger a virtuous cycle of fertility control, investment in education, poverty alleviation, and economic growth. Moreover, permitting migration of high skilled individuals to developed countries would mitigate the issues associated with aging populations in those societies, while encouraging human capital formation in developing countries.
    Keywords: Fertility, Demographic Structure, Unified Growth Theory, Migration
    JEL: J13 J16 J24 O15 O40
    Date: 2014–10
  2. By: Cagala, Tobias; Glogowsky, Ulrich; Grimm, Veronika; Rincke, Johannes
    Abstract: Public goods provision often involves groups of contributors repeatedly interacting with administrators who can extract rents from the pool of contributions. We suggest a novel identification approach that exploits the sequential ordering of decisions in a panel vector autoregressive model to study social interactions in the laboratory. Despite rent extraction, contributors and administrators establish a stable interaction with cooperation matching the level from a comparable Public Goods Game. In the short run, temporary changes in behavior trigger substantial behavioral multiplier effects. We demonstrate that cooperation breeds trustworthiness and vice versa and that one-time disruptions are particularly damaging in settings with a lack of cooperative attitudes and trust.
    Keywords: Cooperation,trustworthiness,rent extraction,methods for laboratory experiments,panel vector autoregressive model
    JEL: C32 C91 C92 H41
    Date: 2015
  3. By: Zhao, Guo
    Abstract: I propose a dynamic game model that is consistent with the paradigm of bounded rationality. Its main advantages over the traditional approach based on perfect rationality are that: (1) the strategy space is a chain-complete partially ordered set; (2) the response function is certain order-preserving map on strategy space; (3) the evolution of economic system can be described by the Dynamical System defined by the response function under iteration; (4) the existence of pure-strategy Nash equilibria can be guaranteed by fixed point theorems for ordered structures, rather than topological structures. This preference-response framework liberates economics from the utility concept, and constitutes a marriage of normal-form and extensive-form games.
    Keywords: Dynamic Games,Bounded Rationality,Dynamical System, fixed point theorems,chain-complete partially ordered set,Coase theorem,impossibility theorem, Keynesian beauty contest,Bertrand Paradox, backward induction paradox
    JEL: C7 D5 D7
    Date: 2015–03–08
  4. By: Hugh Schwartz (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)
    Abstract: These are the notes from the first half of a course in behavioral economics offered in Uruguay in November 2014. This part of the course, entirely verbal, was aimed at outlining the essentials of behavioral economics. The principal assignments were from the second edition of Edward Cartwright’s Behavioral Economics. The second part of the course, taught by Dr. Martin Egozcue, is not included. It emphasized prospect theory, mental accounts and inter-temporal decision making, and featured substantial mathematical input.
    Keywords: behavioral economics, perception, heuristics, empirical verifications, prospect theory, visceral and emotional considerations
    JEL: C9 Y9 Z
    Date: 2014–12
  5. By: Fabrizio Germano; Peio Zuazo-Garin
    Abstract: We study an interactive framework that explicitly allows for non-rational behavior. We do not place any restrictions on how players can deviate from rational behavior. Instead we assume that there exists a lower bound p E [0,1] such that all players play and are believed to play rationally with a probability p or more. This, together with the assumption of a common prior, leads to what we call the set of p-rational outcomes, which we define and characterize for arbitrary p E [0,1]. We then show that this set varies continuously in p and converges to the set of correlated equilibria as p approaches 1, thus establishing robustness of the correlated equilibrium concept to relaxing rationality and common knowledge of rationality. The p-rational outcomes are easy to compute, also for games of incomplete information, and they can be applied to observed frequencies of play to compute a measure p that bounds from below the probability with which any given player is choosing actions consistent with payoff maximization and common knowledge of payoff maximization.
    Keywords: strategic interaction, correlated equilibrium, robustness to bounded rationality, approximate knowledge, incomplete information, measure of rationality, experiments.
    JEL: C72 D82 D83
    Date: 2015–02

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