Risk and Evolution

Ted To

Microeconomics from EconWPA

Abstract: I examine a Knightian model of entrepreneurial risk and investment where in addition to the self-selection process for choosing entrepreneurs, there is an evolutionary selection process over the representation of various risk attitudes. Under a standard evolutionary dynamic, rather than converging to a population of risk-neutrals (fitness maximizers), the population converges to a stationary distribution where both risk- averse and risk-loving types are represented and where only the risk- loving types invest. Many types are represented in stationary population distributions because an evolutionary market environment protects and encourages diversity with different types specializing in different activities and in the steady state each type earns, on average, the same objective payoff.

Keywords: preference evolution; risk and uncertainty; entrepreneur (search for similar items in EconPapers)
JEL-codes: C72 D81 (search for similar items in EconPapers)
Date: Written 1995-11-16
Note: Type of Document - Tex DVI file; prepared on emTeX; to print on any; pages: 32 ; figures: included
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Related works:
Working Paper: Risk and Evolution (1995)
Journal Article: Risk and evolution (1999)
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