Evolutionary Thinking in Microeconomic Models: Prestige Bias and Market Bubbles

Abstract

Evolutionary models broadly support a number of social learning strategies likely important in economic behavior. Using a simple model of price dynamics, I show how prestige bias, or copying of famed (and likely successful) individuals, influences price equilibria and investor disposition in a way that exacerbates or creates market bubbles. I discuss how integrating the social learning and demographic forces important in cultural evolution with economic models provides a fruitful line of inquiry into real-world behavior. © 2013 Adrian Bell.