Risk and Evolution
I examine a Knightian model of entrepreneurial risk and investment where in addition to the self-selection process for choosing entrepreneurs, there is an evolutionary selection process over the representation of various risk attitudes. Under a standard evolutionary dynamic, rather than converging to a population of risk-neutrals (fitness maximizers), the population converges to a stationary distribution where both risk-averse and risk-loving types are represented and where only the risk-loving types invest. Many types are represented in stationary population distributions because an evolutionary market environment protects and encourages diversity with different types specalizing in different activities and in the steady state each type earns, on average, the same objective payoff.
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- Ed Hopkins, .
"Learning, Matching and Aggregation,"
Department of Economics
1996 : II, Edinburgh School of Economics, University of Edinburgh.
- Ed Hopkins, 1995. "Learning, Matching and Aggregation," ESE Discussion Papers 2, Edinburgh School of Economics, University of Edinburgh.
- Ed Hopkins, 1995. "Learning, Matching and Aggregation," Game Theory and Information 9512001, EconWPA.
- Ed Hopkins, . "Learning, Matching and Aggregation," Discussion Papers 1996-2, Edinburgh School of Economics, University of Edinburgh.
- Ed Hopkins, . "Learning, Matching and Aggregation," ELSE working papers 033, ESRC Centre on Economics Learning and Social Evolution.
- Hopkins, E., 1995. "Learning, Matching and Aggregation," G.R.E.Q.A.M. 95a20, Universite Aix-Marseille III.
- Fudenberg, Drew & Tirole, Jean, 1984. "The Fat-Cat Effect, the Puppy-Dog Ploy, and the Lean and Hungry Look," American Economic Review, American Economic Association, vol. 74(2), pages 361-66, May.
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