Evolutionary stability of prospect theory preferences

Marc Oliver Rieger

Journal of Mathematical Economics, 2014, vol. 50, issue C, 1-11

Abstract: We demonstrate that in simple 2×2 games (cumulative) prospect theory preferences can be (semi-)evolutionarily stable, in particular, a population of players with prospect theory preferences is stable against more rational players, i.e. players with a smaller degree of probability weighting. We also show that in a typical game with infinitely many strategies, the “war of attrition”, probability weighting is (semi-)evolutionarily stable. Finally, we generalize to other notions of stability. Our results may help to explain why probability weighting is generally observed in humans, although it is not optimal in usual decision problems.

Keywords: Prospect theory; Cumulative prospect theory; Probability weighting; Nash equilibria; Evolutionary stability; War of attrition (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:50:y:2014:i:c:p:1-11

DOI: 10.1016/j.jmateco.2013.11.002

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