Efficiency and Evolution of Social Preferences and Prosocial Behavior

Abstract

One might view social life as a sequence of competitive markets were a large number of economic agents interact anonymously and were individual decisions have only a negligible influence on each other. This is certainly an extreme description of the world. At the other extreme one might model social life as a sequence of two person games in which both players know each other very well and were each individual’s well-being depends to a large extent on the other player’s decisions. Of course, the truth will be a mixture of both and there are other intermediate forms of interaction, e. g. small group interaction, as well. The analysis here relies on a two-player model. It will be shown that in this case social preferences of the agents can generate economic efficiency and, moreover, that such preferences can be evolutionarily stable. Since social preferences may generate prosocial actions the study is at the same time on the evolution of prosocial behavior.