Evolution of preferences

Eddie Dekel, Jeffrey C. Ely, Okan Yilankaya

Research output: Contribution to journalArticlepeer-review

99 Citations (Scopus)

Abstract

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).

Original languageEnglish
Pages (from-to)685-704
Number of pages20
JournalReview of Economic Studies
Volume74
Issue number3
DOIs
Publication statusPublished - Jul 1 2007

ASJC Scopus subject areas

  • Economics and Econometrics

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