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Co-evolution of preferences and information in simple games of trust

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  • Güth, Werner
  • Kliemt, Hartmut
  • Peleg, Bezalel

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 cycling around the rest point if the informational status of individuals evolves rather than being chosen strategically. --

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Bibliographic Info

Paper provided by Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes in its series SFB 373 Discussion Papers with number 1998,72.

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Date of creation: 1998
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Handle: RePEc:zbw:sfb373:199872

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Keywords: Evolutionary game models; Endogenous preference formation; Trust relationships;

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References

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  1. 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.
  2. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, Elsevier, vol. 27(2), pages 245-252, August.
  3. Brennan, G. & Güth, W. & Kliemt, H., 1997. "Trust in the Shadow of the Courts," Discussion Paper, Tilburg University, Center for Economic Research 1997-89, Tilburg University, Center for Economic Research.
  4. 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, American Economic Association, vol. 77(4), pages 593-604, September.
  5. Martin Posch, 1997. "Cycling in a stochastic learning algorithm for normal form games," Journal of Evolutionary Economics, Springer, Springer, vol. 7(2), pages 193-207.
  6. Arthur, W Brian, 1993. "On Designing Economic Agents That Behave Like Human Agents," Journal of Evolutionary Economics, Springer, Springer, vol. 3(1), pages 1-22, February.
  7. Guth, W. & Kliemt, H., 1993. "Competition or Co-Operation," Papers, Tilburg - Center for Economic Research 9339, Tilburg - Center for Economic Research.
  8. Kliemt, Hartmut, 2001. "Rationality and Reality," Kyklos, Wiley Blackwell, Wiley Blackwell, vol. 54(2-3), pages 309-16.
  9. Friedman, Daniel, 1991. "Evolutionary Games in Economics," Econometrica, Econometric Society, Econometric Society, vol. 59(3), pages 637-66, May.
  10. Josef Hofbauer & Karl H. Schlag, 2000. "Sophisticated imitation in cyclic games," Journal of Evolutionary Economics, Springer, Springer, vol. 10(5), pages 523-543.
  11. Gale, John & Binmore, Kenneth G. & Samuelson, Larry, 1995. "Learning to be imperfect: The ultimatum game," Games and Economic Behavior, Elsevier, Elsevier, vol. 8(1), pages 56-90.
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Cited by:
  1. Steffen Huck & Georg Kirchsteiger & Jörg Oechssler, 2005. "Learning to like what you have - explaining the endowment effect," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 115(505), pages 689-702, 07.
  2. Alex Possajennikov, 2004. "Two-Speed Evolution of Strategies and Preferences In Symmetric Games," Theory and Decision, Springer, Springer, vol. 57(3), pages 227-263, November.
  3. Werner Güth & Hartmut Kliemt & Georg v. Wangenheim, 2006. "Verstehen, Verständigung, Vertrag - Ökonomik als Geistes-, Natur- und Staatswissenschaft," Papers on Strategic Interaction, Max Planck Institute of Economics, Strategic Interaction Group 2006-12, Max Planck Institute of Economics, Strategic Interaction Group.
  4. Stahl, Dale O. & Haruvy, Ernan, 2008. "Level-n bounded rationality in two-player two-stage games," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 65(1), pages 41-61, January.
  5. Daniel Friedman & Nirvikar Singh, 2002. "Equilibrium Vengeance," CESifo Working Paper Series 766, CESifo Group Munich.
  6. Fali Huang, 2007. "Building Social Trust: A Human-Capital Approach," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 163(4), pages 552-573, December.
  7. Thomas Gehrig & Werner Güth & René Levínský, 2013. "On insider trading and belief evolution," Journal of Evolutionary Economics, Springer, Springer, vol. 23(4), pages 767-781, September.
  8. Daniel Friedman & Nirvikar Singh, 2004. "Vengefulness Evolves in Small Groups," Game Theory and Information, EconWPA 0412005, EconWPA.
  9. Anders Poulsen & Gert Svendsen, 2005. "Social Capital and Endogenous Preferences," Public Choice, Springer, Springer, vol. 123(1), pages 171-196, April.
  10. 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.
  11. Guth, Werner & Kliemt, Hartmut, 2004. "Evolutionary parallelism versus co-evolution: a comment on Joseph Henrich," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 53(1), pages 75-79, January.
  12. Pierre Courtois & Tarik Tazdaït, 2011. "Learning to trust strangers: an evolutionary perspective," Working Papers, LAMETA, Universtiy of Montpellier 11-06, LAMETA, Universtiy of Montpellier, revised Feb 2011.
  13. Bolle, Friedel & Kaehler, Jessica, 2007. "Experimenters' choices of trust experiments and their consequence for meta-studies," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, Elsevier, vol. 36(6), pages 865-874, December.
  14. Guttman, Joel M., 2013. "On the evolution of conditional cooperation," European Journal of Political Economy, Elsevier, vol. 30(C), pages 15-34.

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