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The Evolutionary Stability of Optimism, Pessimism and Complete Ignorance

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Author Info
Burkhard C. Schipper (Department of Economics, University of California, Davis, One Shields Avenue, Davis, CA 95616, USA. bcschipper@ucdavis.com)

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Abstract

We provide an evolutionary foundation to evidence that in some situations humans maintain optimistic or pessimistic attitudes towards uncertainty and are ignorant to relevant aspects of the environment. Players in strategic games face Knightian uncertainty about opponents’ actions and maximize individually their Choquet expected utility. Our Choquet expected utility model allows for both an optimistic or pessimistic attitude towards uncertainty as well as ignorance to strategic dependencies. An optimist (resp. pessimist) overweights good (resp. bad) outcomes. A complete ignorant never reacts to opponents’ change of actions. With qualifications we show that optimistic (resp. pessimistic) complete ignorance is evolutionary stable / yields a strategic advantage in submodular (resp. supermodular) games with aggregate externalities. Moreover, this evolutionary stable preference leads to Walrasian behavior in those classes of games.

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Publisher Info
Paper provided by SFB/TR 15 Governance and the Efficiency of Economic Systems, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Papers with number 68.

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Date of creation: Nov 2005
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Handle: RePEc:trf:wpaper:68

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Related research
Keywords: ambiguity; Knightian uncertainty; Choquet expected utility; neo-additive capacity; Hurwicz criterion; Maximin; Minimax; Ellsberg paradox; overconfidence; supermodularity; aggregative games; monotone comparative statics; playing the field; evolution of preferences;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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