14. Endogenous Preferences

This chapter introduces evolutionary game theory as a tool for exploring how institutions and preferences coevolve over time, offering a dynamic perspective that goes beyond static equilibrium analysis. Models illustrate how strategies are chosen based on social learning mechanisms (e.g., copying the successful or conforming to the majority), and how scarce and local knowledge, along with positive feedbacks, can lead to a multiplicity of stationary states.

The chapter applies these evolutionary models to understand the evolution of cooperation and of preferences, such as altruism, that support cooperative outcomes. It examines how cultural transmission, including conformist learning, may have contributed to the evolutionary success of altruism. The chapter also explores mechanisms such as repeated interactions, population segmentation, and the punishment of free riders as ways to sustain cooperation even among self-interested individuals.