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The evolution of risk attitudes with fertility thresholds

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  • Robson, Arthur
  • Samuelson, Larry

Abstract

We examine the evolutionary selection of attitudes toward aggregate risk in an age structured population. Aggregate shocks perturb the population's consumption possibilities. Consumption is converted to fertility via a technology that exhibits first increasing and then decreasing returns to scale, captured in the simplest case by a fertility threshold. We show that evolution will select preferences that exhibit arbitrarily high aversion to aggregate risks with even very small probabilities of sufficiently low outcomes. These findings complement the familiar result that evolution will select for greater aversion to aggregate than idiosyncratic risks by identifying circumstances under which the difference can be extreme.

Suggested Citation

  • Robson, Arthur & Samuelson, Larry, 2022. "The evolution of risk attitudes with fertility thresholds," Journal of Economic Theory, Elsevier, vol. 205(C).
    • Handle: RePEc:eee:jetheo:v:205:y:2022:i:c:s0022053122001429
    DOI: 10.1016/j.jet.2022.105552
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    References listed on IDEAS

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    1. Robson, Arthur J., 1996. "The Evolution of Attitudes to Risk: Lottery Tickets and Relative Wealth," Games and Economic Behavior, Elsevier, vol. 14(2), pages 190-207, June.
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    More about this item

    Keywords

    Evolution; Risk aversion; Aggregate risk; Age structured population;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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