Evolutionary Game Theory and Behavioral Economics

Intro

With the increasing importance of mathematics in economics approaches, our project is to focus on the application of quantitative science to behavioral economics. Specifically, we will investigate the more sophisticated tools needed to develop more complicated economic models as the economic thoughts evolve. The economic paradigms of interest are the Walrasian paradigm, which dominated in the third quarter of the 20th century, and another economic paradigm which we refer to as “Bowles’ paradigm” for the sake of easy distinction (it does not necessarily mean that Samuel Bowles invented this paradigm).

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Section Two - Walrasian Paradigm

assumes that individuals choose actions based on the far-sighted evaluation of their consequences based on preferences that are self-regarding and exogenously determined

social interactions take the exclusive form of contractual exchanges

that increasing returns to scale can be ignored in most applications and institutions do not evolve

institutions exist to facilitate trade

represents economic behavior as the solution to a constrained optimization problem faced by a fully informed individual in a virtually institution-free environment

Deduced a few strong predictions concerning the outcomes likely to be observed in the economy

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Section Three - Bowel's Paradigm

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Section Four - Game Theory

I. Introduction

We will first analyze Walrasian’s paradigm and the mathematics behind it. Then, we will point out some of its shortage, i.e. things that the model cannot explain. Finally, we will use the game theoretical approach of Bowles’s paradigm to explain those.

Given the increasing importance of mathematics in economics approaches, our project is to focus on the application of quantitative science to behavioral economics. Specifically, we will investigate the more sophisticated tools needed to develop more complicated economic models as the economic thoughts evolve. The economic paradigms of interest are the Walrasian paradigm, which dominated in the third quarter of the 20th century, and another economic paradigm which we refer to as “Bowles’ paradigm” for the sake of easy distinction (it does not necessarily mean that Samuel Bowles invented this paradigm).

II. Necessary Backgrounds

a. Classical Game Theory b. Evolutionary Game Theory

c. Others

III. Walrasian paradigm

• assumes that individuals choose actions based on the far-sighted evaluation of their consequences based on preferences that are self-regarding and exogenously determined

• that social interactions take the exclusive form of contractual exchanges o repeated interactions are ignored

• that increasing returns to scale can be ignored in most applications and institutions do not evolve

• institutions exist to facilitate trade

IV. Theoretical Institutional Economics (Bowles’ paradigm)

Bowles’ paradigm assumes non-contractual social interactions, adaptive and other-regarding behaviors, and generalized increasing returns.

V. Conclusion

VI. Preferences

(1) Bowles, Samuel. Microeconomics: Behavior, Institutions, and Evolution. Princeton, NJ: Princeton University Press, 2006. Print.

(2) Gintis, Herbert. Game Theory Evolving: A Problem-Centered Introduction to Modeling Strategic Interaction. 1st ed. Princeton, NJ: Princeton University Press, 2000. Print.

(3) Gintis, Herbert. The Bounds of Reason: Game Theory and the Unification of the Behavioral Sciences. Princeton, NJ: Princeton University Press, 2009. Print.