On the Evolutionary Emergence of Optimism

26 Pages Posted: 3 Dec 2000  

Aviad Heifetz

Open University of Israel - Department of Economics and Management

Yossi Spiegel

Tel Aviv University - The Leon Recanati Graduate School of Business Administration

Date Written: October 2000

Abstract

Successful individuals were frequently found to be overly optimistic. These findings are puzzling, as one could expect that realists would perform best in the long run. We show, however, that in a large class of strategic interactions of either cooperation or competition, the equilibrium payoffs of optimists may be higher than those of realists. This is because the very fact of being optimistic changes the game, and drives the adversary to change her equilibrium behavior, possibly to the benefit of the optimist. Suppose, then, that a population consists initially of individuals with various perceptional tendencies -- pessimists and optimists to various extents, as well as of realists. Individuals meet in pairs to interact, and more successful tendencies proliferate faster. We show that as time goes by, some moderate degree of optimism will take over, and outnumber all other tendencies.

Keywords: Optimism, Evolution of Preferences, Belief Perseverance, Confirmation Bias, Dominance Solvability, Selection Dynamics

JEL Classification: C72, C73

Suggested Citation

Heifetz, Aviad and Spiegel, Yossi, On the Evolutionary Emergence of Optimism (October 2000). Available at SSRN: https://ssrn.com/abstract=247355 or http://dx.doi.org/10.2139/ssrn.247355

Aviad Heifetz

Open University of Israel - Department of Economics and Management ( email )

108 Ravutski st.
P.O. B. 808
Raanana, 43107
Israel
+972 9 778 1878 (Phone)
+972 9 778 0668 (Fax)

HOME PAGE: http://www.openu.ac.il/Personal_sites/Aviad-Heifetz.html

Yossi Spiegel (Contact Author)

Tel Aviv University - The Leon Recanati Graduate School of Business Administration ( email )

Ramat Aviv, Tel Aviv, 69978
Israel
972-3-640-9063 (Phone)
972-3-640-7739 (Fax)

HOME PAGE: http://www.tau.ac.il/~spiegel

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