nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2017‒12‒11
four papers chosen by
Matthew Baker
City University of New York

  1. The Role of Agents’ Propensity toward Conformity and Independence in the Process of Institutional Change By Angela Ambrosino
  2. An evolutionary analysis of bidding behaviour in fair division games By Werner Güth; Paul Pezanis-Christou
  3. Mixing and Diffusion in a Two-Type Population By Segismundo S. Izquierdo; Luis R. Izquierdo; Dunia López-Pintado
  4. The balance of growth and risk in population dynamics By Thomas Gueudr\'e; David Martin

  1. By: Angela Ambrosino
    Abstract: This paper analyses institutional change and Veblen’s work (1907, 1914, 1919) under the perspective of cognitive economics. Particularly it focuses on two interesting issues of Veblen’s theory of economic change: 1. in Veblen’s view habits are both mental habits and behavioral habits and they play a twofold role in economic change because they are particularly relevant both as elements of propensity, and as forces resisting to change. 2 Veblen gives an exhaustive definition of instincts and habits but he does not completely explain the cognitive processes that bring changes and evolution in social habits. He develops an economic theory at the base of which there is an evolutionary view of reality and a deep awareness of the role of the human mind within the decision-making processes of choice. This paper is aimed at analyzing both issues using the interpretive tools offered by psychology and discussing the role of agents psychological propensity toward conformity and independence in explaining institutional change. The central idea is that if we better encompass the theory of conformity and independence developed in psychology (starting from Asch, 1952) in the analysis of economic institutions, we can better explain institutional change. Conformity is the effect of the pressure of social group on agents’ behavior. That concept contributes to explain resistance to change. On the other hand, psychology shows that agents are also subject to mechanisms of independence. These are key elements in explaining behavioral change. The analysis of Veblen’s instinct-habit concept under conformity-independence perspective shows interesting connections between Veblen and Hayek’s ideas of economic change. Hayek’s concept of evolution based on psychological and neurobiological aspect, in fact, is a contribution of great significance both in explaining the dual role of habits in institutional change and in understanding individual mechanisms that bring changes in social habits.
    Keywords: Institutional change, old institutional economics, cognitive economics, Veblen, Hayek
    JEL: B15 B20 B25 B52 B53
    Date: 2017–02
  2. By: Werner Güth (Max Planck Institute for Collective Goods (Bonn) and LUISS (Rome)); Paul Pezanis-Christou (School of Economics, University of Adelaide)
    Abstract: We justify risk neutral equilibrium bidding in commonly known fair division games with incomplete information and counterfactual considerations via (i) optimally responding to individual conjectural beliefs concerning other bidders' behavior, what avoids counterfactual bidding, and (ii) determining the evolutionarily stable conjectural beliefs when fitness is measured by expected payoffs, what does not require common knowledge. Compared to auctions, fair division games feature interactive bidding contests in closed groups due to sharing the sales price equally among bidders. We axiomatically justify the game forms of first- and second-price fair division games, the former (latter) being over-bidding (under-bidding) proof, and we provide a condition for evolutionarily stable bidding to coincide with equilibrium bidding irrespectively of the number of bidders.
    Date: 2017–10
  3. By: Segismundo S. Izquierdo (Department of Industrial Organization, Universidad de Valladolid.); Luis R. Izquierdo (Department of Economics, Universidad de Burgos.); Dunia López-Pintado (Department of Economics, Universidad Pablo de Olavide)
    Abstract: The outbreak of epidemics, the rise of religious radicalization, or the motivational influence of fellow students in classrooms are some of the issues that can be described as diffusion processes in heterogeneous groups. Understanding the role that interaction patterns between groups (e.g. homophily or segregation) play in the diffusion of certain traits or behaviors is a major challenge for contemporary societies. Here, we study the effects on diffusion processes of mixing (or, alternatively, segregating) two different groups –one group that presents some sensitivity or propensity to infection, and another group with a different propensity. We find non-monotonic effects of mixing and Pareto inefficient segregation levels, i.e., situations where a change in the mixing level can benefit both groups, e.g., where an increase in the mixing level can reduce the expected infection levels in both groups. These findings can have fundamental consequences for the design of inclusion policies.
    Keywords: Diffusion, Mixing, Segregation, Homophily, SIS.
    JEL: C73 D85 L14 O33
    Date: 2017–11
  4. By: Thomas Gueudr\'e; David Martin
    Abstract: Essential to each other, growth and exploration are jointly observed in populations, be it alive such as animals and cells or inanimate such as goods and money. But their ability to move, crucial to cope with uncertainty and optimize returns, is tempered by the space/time properties of the environment. We investigate how the environment shape optimal growth and population distribution in such conditions. We uncover a trade-off between risks and returns by revisiting a common growth model over general graphs. Our results reveal a rich and nuanced picture: fruitful strategies commonly lead to risky positions, but this tension may nonetheless be alleviated by the geometry of the explored space. The applicability of our conclusions is subsequently illustrated over an empirical study of financial data.
    Date: 2017–12

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