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Title:What to maximize if you must PDF Logo
Authors:Heifetz, Aviad
Shannon, Chris
Spiegel, Yossi
Issue Date:2004
Series/Report no.:Discussion paper // Center for Mathematical Studies in Economics and Management Science 1414
Abstract:The assumption that decision makers choose actions to maximize their preferences is a central tenet in economics. This assumption is often justied either formally or informally by appealing to evolutionary arguments. In contrast, we show that in almost every game and for almost every family of distortions of a player’s actual payoþs, some degree of this distortion is benecial to the player because of the resulting eþect on opponents’ play. Consequently, such distortions will not be driven out by any evolutionary process involving payoþ-monotonic selection dynamics, in which agents with higher actual payoþs proliferate at the expense of less successful agents. In particular, under any such selection dynamics, the population will not converge to payoþ-maximizing behavior. We also show that payoþ-maximizing behavior need not prevail even when preferences are imperfectly observed.
Document Type:Working Paper
Appears in Collections:Discussion Papers, Kellogg School of Management, Northwestern University

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