Indirect Evolutionary Approach Research Articles

Evolution of fairness in the divide-a-lottery game

In this paper, we show that fairness can evolve in the divide-a-lottery game which is more general than the divide-a-dollar game by using an indirect evolutionary approach. In the divide-a-lottery game, the size of a pie is uncertain. Two players sequentially bid for a share and they get their bid if the allocation based on the bids turns out to be feasible and otherwise neither gets anything. In this game, rational players over-compete for a higher share, resulting in a high probability of failure in agreement, whereas fair players who dislike the disparity between shares lower their bids thereby reducing the failure probability and thus increasing the expected payoff. As a result, fairness strictly dominates rationality. This is the mechanism through which fairness evolves. However, this result is not robust against even a slight uncertainty about the opponent’s type. Surprisingly, we show a contrasted simulation result that only rational players who are strictly dominated by fair players survive evolutionarily for most of the parameter values if players have even a slight chance of not knowing the opponent’s type. Our simulation results in a local interaction model in which players only know the type of closer neighbors capture both insights and demonstrate that moderate proportions of both types coexist evolutionarily over time, and that the population average fitness of this polymorphic population is higher than monomorphic population consisting only of fair types or rational types.

The evolutionary stability of in-group altruism in productive and destructive group contests

This article examines the evolutionary stability of other-regarding preferences in a group contest for a prize, which is endogenously determined. In a destructive contest, such as war, contest efforts of all groups decrease the value of the prize. In contrast, in a productive contest, such as a patent race, contest efforts of all groups increase the value of the prize. The indirect evolutionary approach allows to endogenize players’ preferences, that is, the utility weights given by a group member, in her subjective utility function, to the material payoffs of in-group and out-group members. After characterizing the set of evolutionarily stable preference types, I show that the evolutionarily stable degree of in-group altruism is always stronger when the group contest is destructive than when it is productive. Moreover, when the group contest is strongly productive, preference evolution leads to in-group spite. However, a smaller group size and a larger number of competing groups makes this outcome less likely.

Applying evolutionary methods in economics: progress or pitfall?

The Darwinian theory of evolution has arguably become an important building block for experimental and theoretical economists. According to Burnham (J Econ Behav Org 90:S113–S127, 2013), it is possible to formulate novel hypotheses and predictions about human preferences, on the basis of what patterns of behavior would have been adaptive in the ancestral environment. After clarifying two theoretical concepts, the Adaptively Relevant Environment and fitness maximization, I argue that multiple scientifically plausible hypotheses about human preferences are compatible with evolutionary models that target behavior. Moreover, I propose a refinement of Burnham’s method based on theoretical resources provided by the indirect evolutionary approach. Economists apply or build evolutionary models of their own that target particular features of human psychology and cognition. Such models may reduce the number of plausible hypotheses to allow for rigorous scientific testing in laboratory or field experiments.

Evolutionary Stability of Preferences: Altruism, Selfishness and Envy

This paper examines evolutionary stability of preferences by employing deterministic replicator dynamics. The preferences of players are classified into three types: altruism, selfishness, and envy. In the stage game, players compete in pairs to maximize their subjective utilities, and, as a consequence, their material payoffs are realized. We find: (i) a monomorphic population of the altruistic (the envious) has the highest (the lowest) material payoffs; and (ii) in a game between asymmetric preference types, the payoff ordering is reversed, that is, the material payoffs of the altruistic (the envious) are the lowest (the highest). We also investigate the long-run evolution process of preference types by taking the indirect evolutionary approach, under the deterministic replicator dynamics. We first show that if players' efforts are strategic complements, envy is strictly dominated, whereas altruism is strictly dominated if efforts are strategic substitutes, implying that the strictly dominated types die out in the long run. Then, we obtain our main result that there can exist a long-run stable state in which selfish players and envious players survive together if efforts are strategic substitutes, whereas there exists no long-run stable state in which altruistic players and selfish players coexist if efforts are strategic complements.

Elimination of non-individualistic preferences in large population aggregative games

We study evolution of preferences in large population aggregative games. In such games, all agents in society interact with each other. The material payoff or fitness of agents is entirely individualistic. Subjective payoffs, which represent preferences, depend upon a non-individualistic component which is adjusted through a type-dependent preference parameter. Using the indirect evolutionary approach, we show that the individualistic type enjoys fitness dominance under any type distribution in such games. Hence, under a class of evolutionary dynamics that satisfy monotone percentage growth, all non-individualistic types are eliminated. We apply this analysis to two classes of non-individualistic preferences-altruistic and Kantian. Altruistic preferences put a positive weight on the externality imposed on society while Kantian preferences incorporate the Kantian categorical imperative. In two important economic models, the tragedy of the commons and the public goods game, we show that both these classes of preferences are eliminated.

The persistence of social strategies under increasing competitive pressure

In this paper we study the long run outcome if firms are repeatedly matched to play a N-firm Cournot oligopoly game and can select their type of business objective. Firms can either be profit-maximizing or socially concerned, also pursuing consumer welfare. We use an indirect evolutionary approach to distinguish between the endogenous, profit-maximizing choice of the firms’ business objectives and their corresponding market behavior. Our main result is that the prospects of long run survival of firms pursuing social strategies strongly depends on the number of firms in the industry. If a social strategy entails higher marginal production costs, it is best suited if the number of firms in the industry is not too large. In particular, we demonstrate that the relation between long survival and the level of competitiveness of the industry is inverse U-shaped. We confirm this result by using the concept of coalition stability and further show that if a high number of firms adopt a social strategy, welfare might be lower than with just profit-maximizing firms.

A Note on Altruism in Asymmetric Games: An Indirect Evolutionary Approach

This article studies the evolution of altruism. We consider a model in which a population of agents are assortatively matched to play some asymmetric two-player game, and evolution operates at the level of behavior rules. We find that the relationship between the evolutionarily stable level of altruism and the index of assortativity of matching is determined by two novel features: (1) whether the total payoff function of the game exhibits complementarity or substitutability; (2) whether the two players’ strategies affect each other’s fitness in the same direction or the opposite. These two features combined generalize the stability conditions related to Hamilton’s rule to a class of asymmetric games.

The Evolution of Inequality Aversion in a Simplified Game of Life

This paper applies the indirect evolutionary approach to study the evolution of inequality aversion in a simplified game of life. The game comprises a dilemma, a problem of coordination, and a problem of distribution as a general framework for the evolution of preferences. In single game environments, there emerges a global advantage for inequality-averse individuals in the dilemma and a global disadvantage for inequality-averse players who are favoured by the problem of distribution. The simplified game of life puts these strong predictions into perspective. In particular, selfish and inequality-averse individuals may coexist in the subpopulation, favoured in the problem of distribution.

On the evolution of prize perceptions in contests

We apply an indirect evolutionary approach to players’ perceived prize valuations in contests. Evolution in finite populations leads to preferences that overstate the prize’s material value and induce overexpenditure. We establish an equivalence between evolutionarily stable strategies and the behavior induced by evolutionarily stable preferences.

Social norms and the indirect evolution of conditional cooperation

We develop a model of social norms and cooperation in large societies. Within this framework we use an indirect evolutionary approach to study the endogenous formation of preferences and the co-evolution of norm compliance. The multiplicity of equilibria, which emerges in the presence of social norms, is linked to the evolutionary analysis: individuals face situations where many others cooperate as well as situations where a majority free-rides. The evolutionary adaptation to such heterogenous environments favors conditional cooperators, who condition their pro-social behavior on the others’ cooperation. As conditional cooperators react flexibly to their social environment, they dominate free-riders as well as unconditional cooperators.

On the Evolution of Prize Perceptions in Contests

We apply an indirect evolutionary approach to player’ perceived prize valuations in contests. Evolution in finite populations leads to preferences that overstate the prize’s material value and induce overexpenditure. We establish an equivalence between the behavior evolutionarily stable preferences induce and evolutionarily stable strategies.

Evolutionary Selection of Socially Sensitive Preferences in Random Matching Environments

In this paper we study the evolutionary selection of socially sensitive preferences in the context of reference interaction settings such as coordination failure and cooperation. We refer to a specific class of socially sensitive preferences in which players weigh additively their own material payoff against the opponent with either a positive or negative coefficient (λ-players). Preference evolution is guided by replicator dynamics in a context of perfect observability of preferences types and stochastic pairwise matching. We take an indirect evolutionary approach, that is, the selection mechanism operates on the actual material payoffs earned by players, so that any instance of socially sensitive preference can be thought of as instrumentally maintained. We find that the evolutionary viability of socially sensitive preferences basically depends on whether or not they cause a substantial improvement in the achievement of socially efficient outcomes with respect to the case where only self-serving or unconditionally focused preference orientations are observed. Our results suggest that moderate pro-social preference orientations are likely to emerge from social selection even in the absence of an intrinsic motivational drive, whereas extremely pro-social orientations as well as competitive and anti-social ones may need a stronger motivational base.

Trust, Introspection, and Market Participation: An Evolutionary Approach

We build a model where introspection matters - i.e., people rationally form expectations about others using the lens of their own attitudes. Since trustworthy individuals are more optimistic about people than opportunists, they are less afraid to engage in market-based exchanges, where they may be vulnerable to opportunistic behavior. Within this context, we use an indirect evolutionary approach to endogenize preferences for trustworthiness. In some cases, the material rewards from greater market participation may outweigh the material disadvantages from foregoing lucrative expropriation opportunities. This implies that trustworthiness may be evolutionary stable in the long-term. Although stricter enforcement (that limits the scope for opportunistic behavior) does in some cases favor preferences for trustworthy behavior (crowding in) we show that the opposite (crowding out) may also occur. Our findings are consistent with recent empirical evidence.

Evolutionarily stable preferences in contests

We define an indirect evolutionary approach formally and apply it to (Tullock) contests. While it is known that the direct evolutionary approach in the form of finite population ESS yields more aggressive behavior than in Nash equilibrium, it is now shown that the indirect evolutionary approach yields the same more aggressive behavior, too. This holds for any population size N, if the evolution of preferences is determined by behavior in two-player contests. The evolutionarily stable preferences (ESP) of the indirect approach turn out to be negatively interdependent, thereby “rationalizing” the more aggressive behavior.

Evolutionarily Stable Preferences in Contests

We define an indirect evolutionary approach formally and apply it to (Tullock) contests. While it is known (Leininger, 2003) that the direct evolutionary approach in the form of finite population ESS (Schaffer, 1988) yields more aggressive behavior than in Nash equilibrium, it is now shown that the indirect evolutionary approach yields the same more aggressive behavior, too. This holds for any population size N, if evolution of preferences is determined by behavior in two-player contests. The evolutionarily stable preferences (ESP) of the indirect approach turn out to be negatively interdependent, thereby rationalizing the more aggressive behavior.

Evolution of Preferences

We endogenize preferences using the “indirect evolutionary approach”. Individuals are randomly matched to play a two-person game. Individual (subjective) preferences determine their behaviour and may differ from the actual (objective) pay-offs that determine fitness. Matched individuals may observe the opponents' preferences perfectly, not at all, or with some in-between probability. When preferences are observable, a stable outcome must be efficient. When they are not observable, a stable outcome must be a Nash equilibrium and all strict equilibria are stable. We show that, for pure-strategy outcomes, these conclusions are robust to allowing almost perfect, and almost no, observability, with the notable exception that inefficient strict equilibria may fail to be stable with any arbitrarily small degree of observability (despite being stable with no observability).

Evolution of Preferences1

We endogenize preferences using the “indirect evolutionary approach”. Individuals are randomly matched to play a two-person game. Individual (subjective) preferences determine their behaviour and may differ from the actual (objective) pay-offs that determine fitness. Matched individuals may observe the opponents’ preferences perfectly, not at all, or with some in-between probability. When preferences are observable, a stable outcome must be efficient. When they are not observable, a stable outcome must be a Nash equilibrium and all strict equilibria are stable. We show that, for pure-strategy outcomes, these conclusions are robust to allowing almost perfect, and almost no, observability, with the notable exception that inefficient strict equilibria may fail to be stable with any arbitrarily small degree of observability (despite being stable with no observability).

Social Norms and the Evolution of Conditional Cooperation

This paper develops a model of social norms and cooperation in large societies. Within this framework we use an indirect evolutionary approach to study the endogenous formation of preferences and the coevolution of norm compliance. Thereby we link the multiplicity of equilibria, which emerges in the presence of social norms, to the evolutionary analysis: Individuals face situations where many others cooperate as well as situations where a majority free-rides. The evolutionary adaptation to such heterogenous environments will favor conditional cooperators, who condition their pro-social behavior on the others' cooperation. As conditional cooperators react flexibly to their social environment, they dominate free-riders as well as unconditional cooperators.

Inequality Aversion in a Variety of Games – An Indirect Evolutionary Analysis

The indirect evolutionary approach integrates forward‐looking evaluation of opportunities and adaptation in the light of the past. Subjective motivation determines behaviour, but long‐run evolutionary success of motivational types depends on objective factors only. This can justify intrinsic aversion to inequality in reward allocation games. Whereas earlier analysis was restricted to specific games, this article considers a more complex environment comprising different games which – studied in isolation – yield opposite implications. Persistent divergence between intrinsic motivation and true material success is possible depending on the definition of inequality aversion as well as on agents’ ability to discriminate between games.

EXPLAINING PRIVATE PROVISION OF PUBLIC GOODS BY CONDITIONAL COOPERATION: AN INDIRECT EVOLUTIONARY APPROACH

We adopt an indirect evolutionary approach to investigate whether and when conditional cooperation can explain the voluntary contribution phenomenon often observed in public goods experiments and in real life. Formally, conditional cooperation is captured by a guilt parameter describing how much an individual feels guilty about contributing less than the average. We find that the evolutionary stability of conditional cooperation depends on what is known about the (individual) guilt parameter of other group members.