Endowment Effects in Evolutionary Game Theory: Enhancing Property Rights

42 Pages Posted: 8 Sep 2017 Last revised: 10 Dec 2017

Date Written: August 24, 2017


There are many instances in nature of animals having a form of property rights, a respect for mine and thine. This paper addresses the question of how a norm of respecting property rights can emerge within a group of individuals without access to third party enforcement. Building upon work in economics and biology, an agent based model is presented that examines the processes by which property rights emerge within a population. Consistent with findings in biology and evolutionary economics, this process dispenses with deliberately planned creation of property rights and demonstrates their spontaneous emergence by virtue of a few simple factors. Key to this emergence is the endowment effect, which causes owners of a good to be more willing to fight against a challenger to retain possession. This asymmetry in action creates a strong tendency towards challengers respecting the possession claims of owners over time, resulting in emergent property rights.

Keywords: property rights, endowment effect, agent simulation

JEL Classification: P48, C7, B52, H3

Suggested Citation

Hammer, Eric, Endowment Effects in Evolutionary Game Theory: Enhancing Property Rights (August 24, 2017). GMU Working Paper in Economics No. 17-47. Available at SSRN: https://ssrn.com/abstract=3025492 or http://dx.doi.org/10.2139/ssrn.3025492

Eric Hammer (Contact Author)

Hamline University ( email )

1536 Hewitt Avenue
St. Paul, MN 55104
United States

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