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Co-evolution of Preferences and Information in Simple Games of Trust

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  • Werner Güth
  • Hartmut Kliemt
  • Bezalel Peleg

Abstract

In standard rational choice modelling decisions are made according to given information and preferences. In the model presented here the `information technology' of individual decision-makers as well as their preferences evolve in a dynamic process. In this process decisions are made rationally by players who differ in their informational as well as in their preference type. Relative success of alternative decisions feeds back on the type composition of the population which in turn influences rational decision-making. An indirect evolutionary analysis of an elementary yet important basic game of trust shows that under certain parameter constellations the population dynamics of the evolutionary process specify a unique completely mixed rest point. However, as opposed to previous studies of preference formation in the game of trust there is no convergence to but only circumventing the rest point if the informational status of individuals evolves rather than being chosen strategically. Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2000.

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Bibliographic Info

Article provided by Verein für Socialpolitik in its journal German Economic Review.

Volume (Year): 1 (2000)
Issue (Month): 1 (02)
Pages: 83-110

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Handle: RePEc:bla:germec:v:1:y:2000:i:1:p:83-110

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  1. Hofbauer, Josef & Karl H. Schlag, . "Sophisticated Imitation in Cyclic Games," Discussion Paper Serie B 427, University of Bonn, Germany, revised Mar 1998.
  2. Gueth, W. & Kliemt, H., 1993. "Competition or Co-Operation," Discussion Paper 1993-39, Tilburg University, Center for Economic Research.
  3. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
  4. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, vol. 59(3), pages 637-66, May.
  5. Arthur, W Brian, 1993. "On Designing Economic Agents That Behave Like Human Agents," Journal of Evolutionary Economics, Springer, vol. 3(1), pages 1-22, February.
  6. Brennan, G. & Güth, W. & Kliemt, H., 1997. "Trust in the Shadow of the Courts," Discussion Paper 1997-89, Tilburg University, Center for Economic Research.
  7. Martin Posch, 1997. "Cycling in a stochastic learning algorithm for normal form games," Journal of Evolutionary Economics, Springer, vol. 7(2), pages 193-207.
  8. Frank, Robert H, 1987. "If Homo Economicus Could Choose His Own Utility Function, Would He Want One with a Conscience?," American Economic Review, American Economic Association, vol. 77(4), pages 593-604, September.
  9. Ross Cressman & Jean-Francois Wen & William Morrison, 1998. "On the Evolutionary Dynamics of Crime," Canadian Journal of Economics, Canadian Economics Association, vol. 31(5), pages 1101-1117, November.
  10. Kliemt, Hartmut, 2001. "Rationality and Reality," Kyklos, Wiley Blackwell, vol. 54(2-3), pages 309-16.
  11. Gale, John & Binmore, Kenneth G. & Samuelson, Larry, 1995. "Learning to be imperfect: The ultimatum game," Games and Economic Behavior, Elsevier, vol. 8(1), pages 56-90.
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Cited by:
  1. Werner Güth & Hartmut Kliemt & Georg v. Wangenheim, 2006. "Verstehen, Verständigung, Vertrag - Ökonomik als Geistes-, Natur- und Staatswissenschaft," Papers on Strategic Interaction 2006-12, Max Planck Institute of Economics, Strategic Interaction Group.
  2. Daniel Friedman & Nirvikar Singh, 2004. "Vengefulness Evolves in Small Groups," Game Theory and Information 0412005, EconWPA.
  3. Friedman, Daniel & Singh, Nirvikar, 2007. "Equilibrium Vengeance," MPRA Paper 4321, University Library of Munich, Germany.
  4. Steffen Huck & Georg Kirchsteiger & Joerg Oechssler, 1997. "Learning to Like What You Have - Explaining the Endowment Effect," Game Theory and Information 9702001, EconWPA, revised 15 May 1997.
  5. Bolle, Friedel & Kaehler, Jessica, 2007. "Experimenters' choices of trust experiments and their consequence for meta-studies," The Journal of Socio-Economics, Elsevier, vol. 36(6), pages 865-874, December.
  6. Vogt, Carsten, 2000. "The evolution of cooperation in Prisoners' Dilemma with an endogenous learning mutant," Journal of Economic Behavior & Organization, Elsevier, vol. 42(3), pages 347-373, July.
  7. Anders Poulsen & Gert Svendsen, 2005. "Social Capital and Endogenous Preferences," Public Choice, Springer, vol. 123(1), pages 171-196, April.
  8. Ernan Haruvy & Dale Stahl, 2004. "Level-n Bounded Rationality on a Level Playing Field of Sequential Games," Econometric Society 2004 North American Winter Meetings 126, Econometric Society.

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