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Modelling change in individual characteristics: an axiomatic framework

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  • Dietrich, Franz

    (METEOR)

Abstract

Economic models describe individuals in terms of underlying characteristics, such as taste for some good, sympathy level for another player, time discount rate, risk attitude, and so on. In real life, such characteristics change through experiences: taste for Mozart changes through listening to it, sympathy for another player through observing his moves, and so on. Models typically ignore change, not just for simplicity but also because it is unclear how to incorporate change. I introduce a general axiomatic framework for defining, analysing and comparing rival models of change. I show that seemingly basic postulates on modelling change together have strong implications, like irrelevance of the order in which someone has his experiences and `linearity'' of change. This is a step towards placing the modelling of change on solid axiomatic grounds and enabling non-arbitrary incorporation of change into economic models.

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Bibliographic Info

Paper provided by Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR) in its series Research Memorandum with number 045.

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Date of creation: 2008
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Handle: RePEc:unm:umamet:2008045

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Keywords: mathematical economics;

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  1. Rajiv Sethi & E. Somanathan, 1999. "Preference Evolution and Reciprocity," Game Theory and Information, EconWPA 9903001, EconWPA, revised 12 Mar 1999.
  2. M. Rabin, 2001. "Incorporating Fairness into Game Theory and Economics," Levine's Working Paper Archive 511, David K. Levine.
  3. Fehr, Ernst & Gachter, Simon, 1998. "Reciprocity and economics: The economic implications of Homo Reciprocans1," European Economic Review, Elsevier, Elsevier, vol. 42(3-5), pages 845-859, May.
  4. Margin Dufwenberg & Georg Kirchsteiger, 2001. "A Theory of Sequential Reciprocity," Levine's Working Paper Archive 563824000000000090, David K. Levine.
  5. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, Elsevier, vol. 54(2), pages 293-315, February.
  6. Sethi, Rajiv & Somanathan, E., 2003. "Understanding reciprocity," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 50(1), pages 1-27, January.
  7. Matthew Rabin., 1997. "Psychology and Economics," Economics Working Papers, University of California at Berkeley 97-251, University of California at Berkeley.
  8. Axel Ockenfels & Gary E. Bolton, 2000. "ERC: A Theory of Equity, Reciprocity, and Competition," American Economic Review, American Economic Association, American Economic Association, vol. 90(1), pages 166-193, March.
  9. Hammond, Peter J, 1976. "Changing Tastes and Coherent Dynamic Choice," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 43(1), pages 159-73, February.
  10. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 36(1), pages 75-111, March.
  11. Geanakoplos, John & Pearce, David & Stacchetti, Ennio, 1989. "Psychological games and sequential rationality," Games and Economic Behavior, Elsevier, Elsevier, vol. 1(1), pages 60-79, March.
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Cited by:
  1. Franz Dietrich & Christian List, 2011. "A model of non-informational preference change," Journal of Theoretical Politics, , , vol. 23(2), pages 145-164, April.
  2. Dietrich, Franz & List, Christian, 2013. "Reason-Based Rationalization," MPRA Paper 51776, University Library of Munich, Germany.
  3. Franz Dietrich & Christian List, 2014. "Reason-Based Rationalization," STICERD - Theoretical Economics Paper Series, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE /2014/565, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.

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