RISK PREFERENCE AND SEQUENTIAL CHOICE IN EVOLUTIONARY GAMES

Abstract

There is much empirical evidence that human decision-making under risk does not coincide with expected value maximization, and much effort has been invested into the development of descriptive theories of human decision-making involving risk (e.g. Prospect Theory). An open question is how behavior corresponding to these descriptive models could have been learned or arisen evolutionarily, as the described behavior differs from expected value maximization. We believe that the answer to this question lies, at least in part, in the interplay between risk-taking, sequentiality of choice, and population dynamics in evolutionary environments. In this paper, we provide the results of several evolutionary game simulations designed to study the risk behavior of agents in evolutionary environments. These include several evolutionary lottery games where sequential decisions are made between risky and safe choices, and an evolutionary version of the well-known stag hunt game. Our results show how agents that are sometimes risk-prone and sometimes risk-averse can outperform agents that make decisions solely based on the maximization of the local expected values of the outcomes, and how this can facilitate the evolution of cooperation in situations where cooperation entails risk.