Suchergebnisse

AbstractBehavioral (e.g., consumption) patterns of boundedly rational agents can lead these agents into learning dynamics that appear to be 'wasteful' in terms of well-being or welfare. Within settings displaying preference endogeneity, it is however still unclear how to conceptualize well-being. This paper contributes to the discussion by suggesting a formal model of preference learning that can inform the construction of non-standard notions of dynamic well-being. Based on the assumption that interacting agents are subject to two biases that make them systematically prefer some cultural variants over others, we develop a procedural notion of well-being, based on the idea that policy should modify institutional conditions that generate dynamic instability in preference trajectories, while leaving individual choice sets unrestricted.

In their comment "Modeling the evolution of preferences: an answer to Schubert and Cordes" (2013, this journal), Kapeller and Steinerberger claim to have identified some flaws in the formal argument developed in our paper "Role models that make you unhappy: light paternalism, social learning, and welfare" (2013, this journal). Specifically, they maintain that there is no runaway dynamic in consumption and preference values and that our model therefore always leads to a stable society. In their proof, Kapeller and Steinerberger show that their system is bounded by the highest and lowest preference and consumption levels in the population and can never escape them. Their argument does, however, not apply to the system of coupled dynamic equations we employed to model runaway consumption.

Abstract:This paper relates firm size and opportunism by showing that, given certain behavioural dispositions of humans, the size of a profit-maximizing firm can be determined by cognitive aspects underlying firm-internal cultural transmission processes. We argue that what firms do better than markets – besides economizing on transaction costs – is to establish a cooperative regime among its employees that keeps in check opportunism. A model depicts the outstanding role of the entrepreneur or business leader in firm-internal socialization processes and the evolution of corporate cultures. We show that high opportunism-related costs are a reason for keeping firms' size small.