In search of an evolutionary edge: trading with a few, more, or many

Consider a population of farmers who live around a lake. Each farmer engages in trade with his m adjacent neighbors, where m is termed the “span of interaction.” Trade is governed by a prisoner’s dilemma “rule of engagement.” A farmer’s payoff is the sum of the payoffs from the m prisoner’s dilemma...

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Bibliographic Details
Published in:Journal of evolutionary economics 2011-12, Vol.21 (5), p.721-736
Main Authors: Stark, Oded, Behrens, Doris A.
Format: Article
Language:English
Subjects:
Competitive advantage
Cooperation
Cultural imitation
Defections
Economic Growth
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Entrepreneurship
Evolution
Evolutionary economics
Farmers
Game theory
Institutional/Evolutionary Economics
Microeconomics
Population
R & D/Technology Policy
Regular Article
Social interaction
Social welfare
Studies
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Summary:Consider a population of farmers who live around a lake. Each farmer engages in trade with his m adjacent neighbors, where m is termed the “span of interaction.” Trade is governed by a prisoner’s dilemma “rule of engagement.” A farmer’s payoff is the sum of the payoffs from the m prisoner’s dilemma games played with his neighbors to the left, and with his neighbors to the right. When a farmer dies, his son takes over. The son who adheres to his father’s span of interaction decides whether to cooperate or defect by considering the actions taken and the payoffs received by the most prosperous member of the group comprising his father and his father’s m trading partners. Under a conventional structure of payoffs, it is shown that a large span of interaction is detrimental to the long-run coexistence of cooperation and defection, and conditions are provided under which the social outcome associated with the expansion of trade when individuals trade with a few is better than that when they trade with many. Under the stipulated conditions it is shown, by means of a static comparative analysis of the steady state configurations of the farmer population, that an expansion of the market can be beneficial in one context, detrimental in another.
ISSN:0936-9937
1432-1386
DOI:10.1007/s00191-010-0182-4