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Risk and Evolution

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  • Ted To

    (Dept. of Economics, University of St. Andrews, Scotland)

Abstract

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 specializing in different activities and in the steady state each type earns, on average, the same objective payoff.

Suggested Citation

  • Ted To, 1995. "Risk and Evolution," Microeconomics 9511003, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpmi:9511003
    Note: Type of Document - Tex DVI file; prepared on emTeX; to print on any; pages: 32 ; figures: included
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    References listed on IDEAS

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    1. Hopkins, Ed, 1999. "Learning, Matching, and Aggregation," Games and Economic Behavior, Elsevier, vol. 26(1), pages 79-110, January.
    2. 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 361-366, May.
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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, vol. 115(505), pages 689-702, July.
    2. Smith, Richard D., 2006. "Responding to global infectious disease outbreaks: Lessons from SARS on the role of risk perception, communication and management," Social Science & Medicine, Elsevier, vol. 63(12), pages 3113-3123, December.
    3. Haab, Timothy C. & Whitehead, John C. & Parsons, George R. & Price, Jammie, 2010. "Effects of information about invasive species on risk perception and seafood demand by gender and race," Resource and Energy Economics, Elsevier, vol. 32(4), pages 586-599, November.
    4. Miller, Tina & Boulton, Mary, 2007. "Changing constructions of informed consent: Qualitative research and complex social worlds," Social Science & Medicine, Elsevier, vol. 65(11), pages 2199-2211, December.
    5. Pound, Pandora & Campbell, Rona, 2015. "Exploring the feasibility of theory synthesis: A worked example in the field of health related risk-taking," Social Science & Medicine, Elsevier, vol. 124(C), pages 57-65.
    6. Abel, Gillian M., 2011. "Different stage, different performance: The protective strategy of role play on emotional health in sex work," Social Science & Medicine, Elsevier, vol. 72(7), pages 1177-1184, April.
    7. repec:cup:apsrev:v:95:y:2001:i:01:p:131-144_00 is not listed on IDEAS
    8. Keddell, Emily, 2014. "Theorising the signs of safety approach to child protection social work: Positioning, codes and power," Children and Youth Services Review, Elsevier, vol. 47(P1), pages 70-77.
    9. Shaw, Alison, 2011. "Risk and reproductive decisions: British Pakistani couples' responses to genetic counselling," Social Science & Medicine, Elsevier, vol. 73(1), pages 111-120, July.
    10. Curry, Philip A., 2001. "Decision Making under Uncertainty and the Evolution of Interdependent Preferences," Journal of Economic Theory, Elsevier, vol. 98(2), pages 357-369, June.
    11. Samsonova-Taddei, Anna & Humphrey, Christopher, 2015. "Risk and the construction of a European audit policy agenda: The case of auditor liability," Accounting, Organizations and Society, Elsevier, vol. 41(C), pages 55-72.
    12. Waring, Justin J., 2009. "Constructing and re-constructing narratives of patient safety," Social Science & Medicine, Elsevier, vol. 69(12), pages 1722-1731, December.
    13. Carlos Oyarzun & Johannes Ruf, 2009. "Monotone imitation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 41(3), pages 411-441, December.
    14. Engelmann, Dirk & Steiner, Jakub, 2007. "The effects of risk preferences in mixed-strategy equilibria of 2x2 games," Games and Economic Behavior, Elsevier, vol. 60(2), pages 381-388, August.
    15. Washer, Peter & Joffe, Helene, 2006. "The "hospital superbug": Social representations of MRSA," Social Science & Medicine, Elsevier, vol. 63(8), pages 2141-2152, October.
    16. Campbell, Patricia, 2011. "Boundaries and risk: Media framing of assisted reproductive technologies and older mothers," Social Science & Medicine, Elsevier, vol. 72(2), pages 265-272, January.
    17. Warneryd, Karl, 2002. "Rent, risk, and replication: Preference adaptation in winner-take-all markets," Games and Economic Behavior, Elsevier, vol. 41(2), pages 344-364, November.
    18. Hammer, Raphaël P. & Burton-Jeangros, Claudine, 2013. "Tensions around risks in pregnancy: A typology of women's experiences of surveillance medicine," Social Science & Medicine, Elsevier, vol. 93(C), pages 55-63.
    19. Tovey, P. & Broom, Alex, 2007. "Oncologists' and specialist cancer nurses' approaches to complementary and alternative medicine and their impact on patient action," Social Science & Medicine, Elsevier, vol. 64(12), pages 2550-2564, June.
    20. Schipper, Burkhard C., 2005. "The Evolutionary Stability of Optimism, Pessimism and Complete Ignorance," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 68, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    21. Barratt, Helen & Harrison, David A. & Raine, Rosalind & Fulop, Naomi J., 2015. "Factors that influence the way local communities respond to consultation processes about major service change: A qualitative study," Health Policy, Elsevier, vol. 119(9), pages 1210-1217.
    22. Bohnet, Iris & Frey, Bruno S. & Huck, Steffen, 2001. "More Order with Less Law: On Contract Enforcement, Trust, and Crowding," American Political Science Review, Cambridge University Press, vol. 95(01), pages 131-144, March.
    23. Curtis Breslin, F. & Polzer, Jessica & MacEachen, Ellen & Morrongiello, Barbara & Shannon, Harry, 2007. "Workplace injury or "part of the job"?: Towards a gendered understanding of injuries and complaints among young workers," Social Science & Medicine, Elsevier, vol. 64(4), pages 782-793, February.
    24. Griffiths, F. & Green, E. & Bendelow, G., 2006. "Health professionals, their medical interventions and uncertainty: A study focusing on women at midlife," Social Science & Medicine, Elsevier, vol. 62(5), pages 1078-1090, March.
    25. Dirk Engelmann, 2003. "Risk Aversion Pays in the Class of 2 x 2 Games with No Pure Equilibrium," CERGE-EI Working Papers wp211, The Center for Economic Research and Graduate Education - Economics Institute, Prague.

    More about this item

    Keywords

    preference evolution; risk and uncertainty; entrepreneur;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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