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Evolution of Time Preferences and Attitudes toward Risk

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  • Nick Netzer

Abstract

This paper explores a general model of the evolution and adaption of hedonic utility. It is shown that optimal utility will be increasing strongly in regions where choices have to be made often and decision mistakes have a severe impact on fitness. Several applications are suggested. In the context of intertemporal preferences, the model offers an evolutionary explanation for the existence of conflicting short- and long-run interests that lead to dynamic inconsistency. Concerning attitudes toward risk, an evolutionary explanation is given for S-shaped value functions that adjust to the decision maker's environment. (JEL D81, D83)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.99.3.937
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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 99 (2009)
Issue (Month): 3 (June)
Pages: 937-55

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Handle: RePEc:aea:aecrev:v:99:y:2009:i:3:p:937-55

Note: DOI: 10.1257/aer.99.3.937
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  1. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
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  8. Partha Dasgupta & Eric Maskin, 2004. "Uncertainty and Hyperbolic Discounting," Economics Working Papers 0023, Institute for Advanced Study, School of Social Science.
  9. Kahneman, Daniel & Wakker, Peter P & Sarin, Rakesh, 1997. "Back to Bentham? Explorations of Experienced Utility," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 375-405, May.
  10. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, vol. 47(2), pages 263-91, March.
  11. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  12. Curry, Philip A., 2001. "Decision Making under Uncertainty and the Evolution of Interdependent Preferences," Journal of Economic Theory, Elsevier, vol. 98(2), pages 357-369, June.
  13. Elster, Jon, 1985. "Weakness of will and the free-rider problem," Mathematical Social Sciences, Elsevier, vol. 10(3), pages 293-294, December.
  14. Faruk Gul & Wolfgang Pesendorfer, 2001. "Temptation and Self-Control," Econometrica, Econometric Society, vol. 69(6), pages 1403-1435, November.
  15. Winston, Gordon C., 1980. "Addiction and backsliding : A theory of compulsive consumption," Journal of Economic Behavior & Organization, Elsevier, vol. 1(4), pages 295-324, December.
  16. Larry Samuelson & Arthur J. Robson, 2007. "The Evolution of Intertemporal Preferences," American Economic Review, American Economic Association, vol. 97(2), pages 496-500, May.
  17. Hansson, Ingemar & Stuart, Charles, 1990. "Malthusian Selection of Preferences," American Economic Review, American Economic Association, vol. 80(3), pages 529-44, June.
  18. Arthur J. Robson, 2001. "The Biological Basis of Economic Behavior," Journal of Economic Literature, American Economic Association, vol. 39(1), pages 11-33, March.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Netzer AER - Evolution of Time Preferences and Attitude Toward Risk
    by Liam Delaney in Geary Behaviour Centre on 2010-08-08 10:42:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Marco Castillo & Ragan Petrie & Maximo Torero, 2008. "Rationality and the Nature of the Market," Experimental Economics Center Working Paper Series 2008-12, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
  2. Alger, Ingela & Cox, Donald, 2012. "The Evolution of Altruistic Preferences: Mothers versus Fathers," IAST Working Papers 12-02-02, Institute for Advanced Study in Toulouse (IAST).
  3. Philip A. Curry & John E. Roemer, 2012. "Evolutionary Stability of Kantian Optimization," Working Papers 1206, University of Waterloo, Department of Economics, revised Apr 2012.
  4. Maarten Voors & Eleonora Nillesen & Philip Verwimp & Erwin Bulte & Robert Lensink & Daan van Soest, 2010. "Does Conflict affect Preferences? Results from Field Experiments in Burundi," Research Working Papers 21, MICROCON - A Micro Level Analysis of Violent Conflict.
  5. Laibson, David, 1997. "Golden Eggs and Hyperbolic Discounting," The Quarterly Journal of Economics, MIT Press, vol. 112(2), pages 443-77, May.
  6. Jason Collins & Boris Baer & Ernst Juerg Weber, 2011. "Economic Growth And Evolution: Parental Preference For Quality And Quantity Of Offspring," Economics Discussion / Working Papers 11-05, The University of Western Australia, Department of Economics.
  7. Barnea, Amir & Cronqvist, Henrik & Siegel, Stephan, 2010. "Nature or Nurture: What Determines Investor Behavior?," SIFR Research Report Series 72, Institute for Financial Research.
  8. Bulte, Erwin H. & Horan, Richard D., 2011. "Intergenerational transmission of preferences," Economics Letters, Elsevier, vol. 112(1), pages 85-87, July.
  9. Michele Berardi, 2012. "Endogenous time-varying risk aversion and asset return," Centre for Growth and Business Cycle Research Discussion Paper Series 168, Economics, The Univeristy of Manchester.
  10. de Farias Neto, Joao Jose, 2008. "S-shaped utility, subprime crash and the black swan," MPRA Paper 12122, University Library of Munich, Germany.
  11. Katsunori Yamada & Masayuki Sato & Yasuhiro Nakamoto, 2009. "Measurement of Social Preference from Utility-Based Choice Experiments," ISER Discussion Paper 0759, Institute of Social and Economic Research, Osaka University.

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