nep-evo New Economics Papers
on Evolutionary Economics
Issue of 2019‒08‒12
four papers chosen by
Matthew Baker
City University of New York

  1. Multiple behavioral rules in Cournot oligopolies By Carlos Alós-Ferrer; Alexander Ritschel
  2. The Problem of State-Dependent Utility: A Reappraisal By Jean Baccelli
  3. Gain/Loss Asymmetric Stochastic Differential Utility By Yuki SHIGETA
  4. Evolution and Preference for Local Risk By Heller, Yuval; Robson, Arthur

  1. By: Carlos Alós-Ferrer; Alexander Ritschel
    Abstract: We show that economic decisions in strategic settings are co-determined by multiple behavioral rules. A simple model of intra-individual behavioral heterogeneity predicts testable differences depending on whether rules share a common prescription (alignment) or not (conflict), a classification which is ex ante observable. The predictions include non-trivial response time interactions reflecting the nature of the underlying processes, hence the model is not an as if explanation. In a laboratory experiment and two replications on Cournot oligopolies, we find direct evidence showing that decisions arise from the interaction between a deliberative myopic best reply rule and a more intuitive imitative rule.
    Keywords: Multiple behavioral rules, Cournot oligopoly, best reply, imitation, reinforcement
    JEL: C72 C92 D03
    Date: 2019–07
  2. By: Jean Baccelli (MCMP - Munich Center for Mathematical Philosophy, IHPST - Institut d'Histoire et de Philosophie des Sciences et des Techniques - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique - DEC - Département d'Etudes Cognitives - ENS Paris - ENS Paris - École normale supérieure - Paris)
    Abstract: State-dependent utility is a problem for the behavioral branch of decision theory under uncertainty. It questions the very possibility that beliefs be revealed by choice data. According to the current literature, all models of beliefs are equally exposed to the problem. Moreover, the problem is solvable only when the decision-maker can influence the resolution of uncertainty. This paper gives grounds to reject these two views. The various models of beliefs can be shown to be unequally exposed to the problem of state-dependent utility. The problem can be argued to be solved even when the decision-maker has no influence over the resolution of uncertainty. The implications of such reappraisal for a philosophical appreciation of the revealed preference methodology are discussed.
    Date: 2019–06–27
  3. By: Yuki SHIGETA
    Abstract: This study examines a gain/loss asymmetric utility in continuous time in which the investor discounts their utility gain by more than the utility loss. By employing the theory of stochastic di erential utility, the model allows a time-variable sub- jective discount rate. In addition, the model can express various forms of utility functions including a version of the Epstein{Zin utility. Under the model, the opti- mal consumption/wealth ratio and portfolio weight have di erent functional forms depending on whether the state variables stay in some region.
    Keywords: Gain/Loss Asymmetry, Stochastic Di erential Utility, Consumption{Investment Problem
    JEL: G11
    Date: 2019–08
  4. By: Heller, Yuval; Robson, Arthur
    Abstract: Our understanding of risk preferences can be sharpened by considering their evolutionary basis. Recently, Robatto and Szentes (2017) found that both aggregate risk and idiosyncratic risk generate the same growth rate in a continuous time setting. We introduce a new source of risk, which is correlated between agents in the same location, but is uncorrelated between agents in different locations. We show that this local risk induces a strictly higher growth rate. This shows that interdependence of risk and population structure have important implications in a continuous-time setting, and that natural selection induces individuals to prefer local risk.
    Keywords: Risk preferences, evolution, risk interdependence, long-run growth rate.
    JEL: D81 D91
    Date: 2019–07–21

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