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An Evolutionary Perspective on Goal Seeking and Escalation of Commitment

Hamo, Yoram and Heifetz, Aviad (2001) An Evolutionary Perspective on Goal Seeking and Escalation of Commitment. Social Science Working Paper, 1109. California Institute of Technology , Pasadena, CA. (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20170807-155245396

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Abstract

Maximizing the probability of bypassing an aspiration level, and taking increasing risks to recover previous losses are well-documented behavioral tendencies. They are compatible with individual utility functions that are S-shaped, as suggested in Prospect Theory (Kahneman and Tversky 1979). We explore evolutionary foundations for such preferences. Idiosyncratic innovative activity, while individually risky, enhances the fitness of society because it provides hedging against aggregate disasters that might occur if everybody had pursued the same course of action. In order that individuals choose the socially optimal dosage of innovative activity, the individuals’ preferences should make them strive to improve upon the on-going convention, even if it implies taking gambles that reduce their expected achievements. We show how, in a formal model, the preferences that will be selected for in the course of evolution lead to maximizing the probability of bypassing an aspiration level. Furthermore, when comparing choices with the same probability of achieving this goal, preference is indeed established by maximizing the expected utility of an S-shaped utility function, exhibiting risk loving below the aspiration level and risk aversion beyond it.


Item Type:Report or Paper (Working Paper)
Group:Social Science Working Papers
Subject Keywords:evolution of preferences, escalation of commitment, goal-seeking, aspiration level, Prospect Theory, S-shaped utility function, risk-loving, aggregate risk
Series Name:Social Science Working Paper
Issue or Number:1109
Classification Code:JEL: D80, D81
Record Number:CaltechAUTHORS:20170807-155245396
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20170807-155245396
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79878
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:07 Aug 2017 23:13
Last Modified:03 Oct 2019 18:25

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