Evolution of preferences

Eddie Dekel, Jeffrey C. Ely, Okan Yilankaya

Research output: Contribution to journalArticle

78 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 2007
Externally publishedYes

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Evolution of preferences
Observability
Pure strategies
Nash equilibrium
Fitness
Evolutionary

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Evolution of preferences. / Dekel, Eddie; Ely, Jeffrey C.; Yilankaya, Okan.

In: Review of Economic Studies, Vol. 74, No. 3, 07.2007, p. 685-704.

Research output: Contribution to journalArticle

Dekel, Eddie ; Ely, Jeffrey C. ; Yilankaya, Okan. / Evolution of preferences. In: Review of Economic Studies. 2007 ; Vol. 74, No. 3. pp. 685-704.
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