A Theory of Evolution, Fairness, and Altruistic Punishment
Swiss Finance Institute; ETH Zürich - Department of Management, Technology, and Economics (D-MTEC)
July 19, 2011
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.
Number of Pages in PDF File: 30
Keywords: inequity aversion, other-regarding behavior, utility theory, altruistic punishment, evolution
JEL Classification: D03, C72, D84
Date posted: October 23, 2011