Evolutionary stability of prospect theory preferences

Arbeitspapier

We demonstrate that in simple 2 X 2 games (cumulative) prospect theory preferences can be evolutionarily stable, i.e. a population of players with prospect theory preferences can not be invaded by more rational players. This holds also if probability weighting is applied to the probabilities of mixed strategies. We also show that in a typical game with infinitely many strategies, the 'war of attrition', probability weighting is 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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Papers ; No. 422

Classification and Topics

• Classification: Wirtschaft ; Game Theory and Bargaining Theory: General ; Stochastic and Dynamic Games; Evolutionary Games; Repeated Games ; Criteria for Decision-Making under Risk and Uncertainty
• Subject: prospect theory ; existence of Nash equilibria ; evolutionary stability ; Prospect Theory ; Evolutionäre Spieltheorie ; Nash-Gleichgewicht ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Rieger, Marc Oliver
• Event: Veröffentlichung
• (who): Bielefeld University, Institute of Mathematical Economics (IMW)
• (where): Bielefeld
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/43774
• Last update: 10.03.2025, 11:44 AM CET