Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/173750
Authors: 
Frenkel, Sivan
Heller, Yuval
Teper, Roee
Year of Publication: 
2017
Series/Report no.: 
Working Papers, Bar-Ilan University, Department of Economics 2017-06
Abstract: 
We study the idea that seemingly unrelated behavioral biases can coevolve if they jointly compensate for the errors that any one of them would give rise to in isolation. We suggest that the "endowment effect" and the "winner's curse" could have jointly survived natural selection together. We develop a new family of "hybrid-replicator" dynamics. Under such dynamics, biases survive in the population for a long period of time even if they only partially compensate for each other and despite the fact that the rational type's payoff is strictly larger than the payoffs of all other types.
Subjects: 
Endowment Effect
Winner's Curse
Bounded Rationality
Evolution
JEL: 
C73
D82
D03
Document Type: 
Working Paper

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