A Theory of Evolution, Fairness, and Altruistic Punishment

30 Pages Posted: 23 Oct 2011  

Moritz Hetzer

ETH Zurich

Didier Sornette

Swiss Finance Institute; ETH Zürich - Department of Management, Technology, and Economics (D-MTEC)

Date Written: July 19, 2011

Abstract

This paper identifies and explains the mechanisms that account for the emergence of fairness preferences and altruistic punishment in voluntary contribution mechanisms by combining an evolutionary perspective together with an expected utility model. The approach is motivated by previous findings on other-regarding behavior, the co-evolution of culture, genes and social norms, as well as bounded rationality. Our first result reveals the emergence of two distinct evolutionary regimes that force agents converge either to into a defection state or to a state of coordination, depending on the predominant set of self- or other-regarding preferences. Our second result indicates that subjects in lab experiments of public goods games with punishment coordinate and punish defectors as a result of an aversion against disadvantageous inequitable outcomes. Our third finding identifies disadvantageous inequity aversion as evolutionary dominant and stable in a heterogeneous population of agents that initially only consists of purely self-regarding preferences. We validate our model using previously obtained results from three independently conducted experiments of public goods games with punishment.

Keywords: inequity aversion, other-regarding behavior, utility theory, altruistic punishment, evolution

JEL Classification: D03, C72, D84

Suggested Citation

Hetzer, Moritz and Sornette, Didier, A Theory of Evolution, Fairness, and Altruistic Punishment (July 19, 2011). Available at SSRN: https://ssrn.com/abstract=1927919 or http://dx.doi.org/10.2139/ssrn.1927919

Moritz Hetzer (Contact Author)

ETH Zurich ( email )

Department of Management, Technology and Economics
Kreuzplatz 5
Zurich, CH-8032
Switzerland
+41 44 632 0561 (Phone)

HOME PAGE: http://www.er.ethz.ch

Didier Sornette

Swiss Finance Institute ( email )

c/o University of Geneve
40, Bd du Pont-d'Arve
1211 Geneva, CH-6900
Switzerland

ETH Zürich - Department of Management, Technology, and Economics (D-MTEC) ( email )

Scheuchzerstrasse 7
Zurich, ZURICH CH-8092
Switzerland
41446328917 (Phone)
41446321914 (Fax)

HOME PAGE: http://www.er.ethz.ch/

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