Risk and evolution

Ted To

Economic Theory, 1999, vol. 13, issue 2, 329-343

Abstract: I examine a Knightian (1921) model of risk using a general equilibrium model of investment and trade. A population of agents with various preference types can choose between a safe production technology and a risky production technology. In addition, the distribution of types of agents changes through a standard evolutionary dynamic. For a given population distribution, the equilibrium is in general inefficient, however, by allowing the population distribution to change in response to market generated rewards, the population will converge to one where the equilibrium is efficient and where the population as a whole behaves as if all agents were risk neutral.

Keywords: Risk; ·; Evolution; ·; Entrepreneur. (search for similar items in EconPapers)
JEL-codes: C72 D81 (search for similar items in EconPapers)
Date: 1999-02-17
Note: Received: November 7, 1996; revised version: October 20, 1997
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Citations: View citations in EconPapers (33)

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Working Paper: Risk and Evolution (1995)
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