Evolutionary Foundations of Rational Choice

Abstract:     
We study the potential evolutionary appeal of rationality in a model in which different populations differ with respect to their experimentation over rules of behavior. We show that more risky experimentation in the sense of mean preserving spread dominates less risky experimentation. Experimentation over the set of (strictly) rational rules is shown to be universally more risky than, and therefore dominates, any other symmetric form of experimentation. This evolutionary advantage of strict rationality, furthermore, is quantified and shown to be substantial when learning takes place over a limited amount of time, or when the environment is stochastically changing, or when the complexity or the environment is moderately large.

Keywords: rationality, evolution, weak axiom of revealed preferences, strict preference, adaptation

JEL Classifications: C73, D01, D11

Working Paper Series