Evolutionary justifications for non-Bayesian beliefs

Hanzhe Zhang ()

Economics Letters, 2013, vol. 121, issue 2, 198-201

Abstract: This paper suggests that the evolutionarily optimal belief of an agent’s intrinsic reproductive ability is systematically different from the posterior belief obtained by the perfect Bayesian updating. In particular, the optimal belief depends on how risk-averse the agent is. Although the perfect Bayesian updating remains evolutionarily optimal for a risk-neutral agent, it is not for any other. Specifically, the belief is always positively biased for a risk-averse agent, and the more risk-averse an agent is, the more positively biased the optimally updated belief is. Such biased beliefs align with experimental findings and also offer an alternative explanation to the empirical puzzle that people across the population appear overconfident by consistently overestimating their personal hereditary traits.

Keywords: Non-Bayesian belief; Risk-aversion; Evolutionary economics; Overconfidence; Bias (search for similar items in EconPapers)
JEL-codes: C73 D83 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:121:y:2013:i:2:p:198-201

DOI: 10.1016/j.econlet.2013.08.016

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