|
on Evolutionary Economics |
| By: | Giovanna Devetag; Francesca Pancotto; Thomas Brenner |
| Abstract: | In minority games, players in a group must decide at each round which of two available options to choose, knowing that only subjects who picked the minority op- tion obtain a positive reward. Previous experiments on the minority and similar congestion games have shown that players interacting repeatedly are remarkably able to coordinate eciently, despite not conforming to Nash equilibrium behavior. We conduct an experiment on a minority-of-three game in which each player is a team composed by three subjects. Each team can freely discuss its strategies in the game and decisions must be made via a majority rule. Team discussions are recorded and their content analyzed to detect evidence of strategy co-evolution among teams playing together. Our main results of team discussion analysis show no evidence sup- porting the mixed strategy Nash equilibrium solution, and support a low-rationality, backward-looking approach to model behavior in the game, more consistent with reinforcement learning models than with belief-based models. Showing level-2 ratio- nality (i.e., reasoning about others' beliefs) is positively and signicantly correlated with higher than average earnings in the game, showing that a mildly sophisticated approach pays off. In addition, teams that are more successful tend to become more egocentric over time, paying more attention to their own past successes than to the behavior of other teams. Finally, we nd evidence of mutual adaptation over time, as teams that are more strategic (i.e., they pay more attention to other teams' moves) induce competing teams to be more egocentric instead. Our results contribute to the understanding of coordination dynamics resting on heterogeneity and co-evolution of decision rules rather than on conformity to equilibrium behavior. In addition, they provide support at the decision process level to the validity of modeling behavior using low-rationality reinforcement learning models. |
| Keywords: | coordination, minority game, market eciency, information, self-organization, reinforcement learning s |
| JEL: | C72 C91 C92 |
| Date: | 2011–08–22 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2011/18&r=evo |
| By: | Nordblom, Katarina (Uppsala Center for Fiscal Studies); Zamac, Jovan (Uppsala Center for Fiscal Studies) |
| Abstract: | This paper offers an explanation to why the general observation that elderly hold stronger moral attitudes than young ones may be an age rather than a cohort effect. We apply mechanisms from social psychology to explain how personal norms may evolve over the life cycle. We assume that people update their norms influenced by their own past behavior (e.g., cognitive dissonance) and/or by the attitudes of their peers (normative conformity). We apply the theory on actual norm distributions for young and old concerning tax evasion. Allowing for heterogeneous updating of norms where only those who identify with their network are actually conforming with it, while the others are only influenced by their own past behavior, we can explain the difference between young and old people’s moral values as an age effect through endogenous norm formation. |
| Keywords: | Social norms; Endogenous norms; Tax evasion; Cognitive dissonance; Self-signaling; Normative conformity |
| JEL: | H26 |
| Date: | 2011–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:uufswp:2011_010&r=evo |
| By: | Ron Martin; Peter Sunley |
| Abstract: | Over the past two decades, the notion of ÔemergenceÕ has attracted increasing attention and controversy across the social sciences, as par of a growing interest in the applicability of complexity theory to socio-economic-political systems. Within this context, as economic geographers, our concern in this paper is with the usefulness of the idea of emergence for studying the economic landscape and its evolution. We examine three ÔordersÕ of emergence, and focus attention especially on the third type, Ôdevelopmental or evolutionaryÕ emergence. Despite its limitations, the notion of third order emergence is a potentially valuable organizing concept in economic geography. It provides a framework for exploring how it is that the spatial forms of the economy - clusters, regions, firm networks and so on Ð are recursively related to economic action. |
| Keywords: | Emergence, Supervenience, Downward causation, Evolution, Economic landscape |
| JEL: | B15 R11 R12 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:egu:wpaper:1116&r=evo |
| By: | Bolle, Friedel; Breitmoser, Yves; Otto, Philipp E. |
| Abstract: | This paper proposes two generalization of the core and evaluates them on experimental data of assignment games (workers and firms negotiate wages and matching). The generalizations proposed allow for social utility components (e.g. altruism) and random utility components (e.g. logistic perturbations). These generalizations are well-established in analyses of non-cooperative games, and they prove to be both descriptive and predictive in the assignment games analyzed here. The "logit core" allows us to define a "stochastically more stable" relation on the outcome set, which has intuitive implications, and it fits better than alternative approaches such as random behavior cores and regression modeling. |
| Keywords: | cooperative games; core; random utility; social preferences; laboratory experiment |
| JEL: | C71 C90 D64 |
| Date: | 2011–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32918&r=evo |
| By: | Christian Rusche |
| Abstract: | The direct evolutionary approach according to Leininger (2003) states that players in a two player Tullock rent-seeking contest within a fi nite population behave „as if“ they were relative payoff maximizers. Accordingly contest expenditures are higher than in Nash equilibrium. The indirect evolutionary approach also predicts more aggressive behavior by the players since negatively interdependent preferences are evolutionary stable. Both players are willing to harm themselves in material terms just to harm their opponent even more. I consider that every player in the contest has to contract a delegate either using a relative contract or a no-win-nopay contract. I show that delegation once introduced is able to overcompensate all negative eff ects of negatively interdependent objective functions. But as in the case without delegation a commitment on more aggressive behavior is a dominant strategy. Nevertheless delegation endows principals with a material payoff that is equal to the payoff an individualistic player facing another individualistic player would get. |
| Keywords: | Contest; strategic delegation; spite; agency theory |
| JEL: | C72 D72 M52 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0270&r=evo |
| By: | James Andreoni; Charles Sprenger |
| Abstract: | There is convincing experimental evidence that Expected Utility fails, but when does it fail, how severely, and for what fraction of subjects? We explore these questions using a novel measure we call the uncertainty equivalent. We find Expected Utility performs well away from certainty, but fails near certainty for about 40% of subjects. Comparing non-Expected Utility theories, we strongly reject Prospect Theory probability weighting, we support disappointment aversion if amended to allow violations of stochastic dominance, but find the u-v model of a direct preference for certainty the most parsimonious approach. |
| JEL: | D81 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17342&r=evo |
| By: | David J. Cooper; Matthias Sutter |
| Abstract: | Team success relies on assigning team members to the right tasks. We use controlled experiments to study how roles are assigned within teams and how this affects team performance. Subjects play the takeover game in pairs consisting of a buyer and a seller. Understanding optimal play is very demanding for buyers and trivial for sellers. Teams perform better when roles are assigned endogenously or teammates are allowed to chat about their decisions, but the interaction effect between endogenous role assignment and chat unexpectedly worsens team performance. We argue that ego depletion provides a likely explanation for this surprising result. |
| Keywords: | Role selection in teams, team performance, takeover game, winner’s curse, communication, experiment |
| JEL: | C91 C92 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2011-14&r=evo |
| By: | Malcolm Baker; Jeffrey Wurgler |
| Abstract: | We survey the theory and evidence of behavioral corporate finance, which generally takes one of two approaches. The market timing and catering approach views managerial financing and investment decisions as rational managerial responses to securities mispricing. The managerial biases approach studies the direct effects of managers’ biases and nonstandard preferences on their decisions. We review relevant psychology, economic theory and predictions, empirical challenges, empirical evidence, new directions such as behavioral signaling, and open questions. |
| JEL: | G3 G30 G31 G32 G34 G35 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17333&r=evo |
| By: | Alberto Bisin; Andrea Moro; Giorgio Topa |
| Abstract: | We study a general class of models with social interactions that might display multiple equilibria. We propose an estimation procedure for these models and evaluate its efficiency and computational feasibility relative to different approaches taken to the curse of dimensionality implied by the multiplicity. Using data on smoking among teenagers, we implement the proposed estimation procedure to understand how group interactions affect health-related choices. We find that interaction effects are strong both at the school level and at the smaller friends-network level. Multiplicity of equilibria is pervasive at the estimated parameter values, and equilibrium selection accounts for about 15 percent of the observed smoking behavior. Counterfactuals show that student interactions, surprisingly, reduce smoking by approximately 70 percent with respect to the equilibrium smoking that would occur without interactions. |
| Keywords: | Human behavior ; Social choice ; Health |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:504&r=evo |
| By: | Gerhard Riener (GSBC-EIC - The Economics of Innovative Change, University of Jena); Simon Wiederhold (GSBC-EIC - The Economics of Innovative Change, University of Jena) |
| Abstract: | Controlling employees can have severe consequences in situations that are not fully contractible. However, the perception of control may be contingent on the nature of the relationship between principal and agent. We, therefore, propose a principal-agent model of control that takes into account social identity (in the sense of Akerlof and Kranton, 2000, 2005). From the model and previous literature, we conclude that a shared social identity between the principal and agent has both a cognitive, that is, belief-related, and a behavioral, that is, performance-related, dimension. We test these theoretical conjectures in a labor market experiment with perfect monitoring. Our ndings confirm that social identity has important implications for the agent's decision-making. First, agents who are socially close to the principal (in-group) perform, on average, more on behalf of the principal than socially distant (no-group) agents. Second, social identity shapes the agent's subjective expectations of the acceptable level of control. In-group agents expect to experience less control than no-group agents. Third, an agent's reaction to the monitoring level she eventually faces also depends on social identity. If the experienced level of control is lower than the expected control level, that is, the agent faces a positive sensation, the increase in performance is less pronounced for in-group agents than for no-group agents. In the case of a negative sensation, however, in-group agents react stronger than no-group agents. Put differently, being socially distant from the principal amplies the performance-enhancing effect of a positive control surprise and mitigates the detrimental performance effect of a negative surprise. |
| Keywords: | Control, Identity, Employee motivation, Principal-agent theory, Lab experiment |
| JEL: | C92 M54 |
| Date: | 2011–08–22 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2011-035&r=evo |