nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2019‒05‒20
seven papers chosen by
Matthew Baker
City University of New York

  1. Structural Transformations and Cumulative Causation: Towards an Evolutionary Micro-foundation of the Kaldorian Growth Model. By Andre Lorentz; Tommaso Ciarli; Maria Savona; Marco Valente
  2. An Evolutionary Justification for Overconfidence By Gannon, Kim; Zhang, Hanzhe
  3. Psychological Game Theory By Pierpaolo Battigalli; Martin Dufwenberg
  4. Feasible best-response correspondences and quadratic scoring rules By Norde, Henk; Voorneveld, Mark
  5. The Strategic Display of Emotions By Chen, Daniel; Hopfensitz, Astrid; van Leeuwen, Boris; van de Ven, J.
  6. Guilt Aversion in Economics and Psychology By Bellemare, Charles; Sebald, A.; Suetens, Sigrid
  7. Identifying Present-Bias from the Timing of Choices By Paul Heidhues; Philipp Strack

  1. By: Andre Lorentz; Tommaso Ciarli; Maria Savona; Marco Valente
    Abstract: We build upon the evolutionary model developed in prior works (Ciarli, Lorentz, Savona and Valente 2010b), which formalises the links between production, organisation and functional composition of the employment on the supply side and the endogenous evolution of consumption patterns on the demand side. The main contribution resulting from the exercise proposed here is to derive the Kaldorian cumulative causation mechanism as an emergent property of the dynamics generated by the micro-founded model. More precisely, we discuss the main transition dynamics to a self-sustained growth regime in a two-stage growth patterns generated through the numerical simulation of the model. We then show that these mechanisms lead to the emergence of a Kaldor-Verdoorn law. Finally we show that the structure of demand (among others the heterogeneity in consumption behaviour) itself shapes the type of growth regime emerging from the endogenous structural changes, fostering or hampering the emergence of the Kaldor Verdoorn law.
    Keywords: Structural change; growth; consumption; technological change; cumulative causation; evolutionary economics; Kaldor-Verdoorn Law.
    JEL: O41 L16 C63 E11 O14
    Date: 2019
  2. By: Gannon, Kim (The Abdul Latif Jameel Poverty Action Lab); Zhang, Hanzhe (Michigan State University, Department of Economics)
    Abstract: This paper provides an evolutionary justification for overconfidence. Players are pairwise matched to fight for a resource and there is uncertainty about who wins the resource if they engage in the fight. Players have different confidence levels about their chance of winning although they actually have the same chance of winning in reality. Each player may know or may not know her opponent’s confidence level. We characterize the evolutionary stable equilibrium, represented by players’ strategies and distribution of confidence levels. Under different informational environments, majority of players are overconfident, i.e. overestimate their chance of winning. We also characterize the evolutionary dynamics and the rate of convergence to the equilibrium.
    Keywords: overconfidence; evolutionary game
    JEL: C73 D83
    Date: 2019–04–25
  3. By: Pierpaolo Battigalli; Martin Dufwenberg
    Abstract: The mathematical framework of psychological game theory is useful for describing many forms of motivation where preferences depend directly on own or othersbeliefs. It allows for incorporation of emotions, reciprocity, image concerns, and self-esteem in economic analysis. We explain how and why, discussing basic theory, a variety of sentiments, experiments, and applied work. Keywords: psychological game theory; belief-dependent motivation; reciprocity; emotions; image concerns; self-esteem JEL codes: C72; D91
    Date: 2019
  4. By: Norde, Henk (CentER and Department of Econometrics and Operations Research, Tilburg University); Voorneveld, Mark (Dept. of Economics)
    Abstract: The rational choice paradigm in game theory and other fields of economics has agents best-responding to beliefs about factors that are outside their control. And making certain options a best response is a common problem in mechanism design and information elicitation. But not every correspondence can be made into a best-response correspondence. So what characterizes a feasible best-response correspondence? And once we know that, can we find some or even all utility functions that give rise to this best-response correspondence? We answer these three questions for an expected-utility maximizing agent with finitely many actions and probabilistic beliefs over finitely many states or opponents' strategies. We apply our results to information elicitation problems where contracts (scoring rules) are designed to financially reward an expected-payoff maximizing agent to truthfully reveal a property of her belief by sending a report from some finite set of messages. This leads to a number of new insights: firstly, we characterize exactly which properties can be elicited using scoring rules; secondly, we show that in this class of problems quadratic scoring rules are both necessary and sufficient methods of doing so.
    Keywords: best-response correspondence; best-response equivalence; information elicitation; scoring rule
    JEL: C72 D82 D83
    Date: 2019–04–25
  5. By: Chen, Daniel; Hopfensitz, Astrid; van Leeuwen, Boris (Tilburg University, Center For Economic Research); van de Ven, J. (Tilburg University, Center For Economic Research)
    Abstract: The emotion that someone expresses has consequences for how that person is treated. We study whether people display emotions strategically. In two laboratory experiments, participants play task delegation games in which managers assign a task to one of two workers. When assigning the task, managers see pictures of the workers and we vary whether getting the task is desirable or not. We find that workers strategically adapt their emotional expressions to the incentives they face, and that it indeed pays off to do so. Yet, workers do not exploit the full potential of the strategic display of emotions.
    Keywords: emotions; expressions; communication; experiment; incentives
    JEL: D91 C91 D83
    Date: 2019
  6. By: Bellemare, Charles; Sebald, A.; Suetens, Sigrid (Tilburg University, Center For Economic Research)
    Abstract: We investigate whether the concept of guilt aversion in economics is related to the psychological characterization of the same phenomenon. For trust games and dictator games we report correlations between the guilt sensitivity measured within a framework of psychological games most common in economics and the guilt sensitivity measured using a questionnaire common in psychology (TOSCA-3). We find that the two measures correlate well and significantly in the two settings.
    Keywords: guilt sensitivity; psychological game theory; TOSCA; laboratory experiment; guilt aversion
    JEL: A13 C91
    Date: 2019
  7. By: Paul Heidhues; Philipp Strack
    Abstract: Timing decisions are common: when to file your taxes, finish a referee report, or complete a task at work. We ask whether time preferences can be inferred when \textsl{only} task completion is observed. To answer this question, we analyze the following model: each period a decision maker faces the choice whether to complete the task today or to postpone it to later. Cost and benefits of task completion cannot be directly observed by the analyst, but the analyst knows that net benefits are drawn independently between periods from a time-invariant distribution and that the agent has time-separable utility. Furthermore, we suppose the analyst can observe the agent's exact stopping probability. We establish that for any agent with quasi-hyperbolic $\beta,\delta$-preferences and given level of partial naivete $\hat{\beta}$, the probability of completing the task conditional on not having done it earlier increases towards the deadline. And conversely, for any given preference parameters $\beta,\delta$ and (weakly increasing) profile of task completion probability, there exists a stationary payoff distribution that rationalizes her behavior as long as the agent is either sophisticated or fully naive. An immediate corollary being that, without parametric assumptions, it is impossible to rule out time-consistency even when imposing an a priori assumption on the permissible long-run discount factor. We also provide an exact partial identification result when the analyst can, in addition to the stopping probability, observe the agent's continuation value.
    Date: 2019–05

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