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Emergence of scale-free characteristics in socio-ecological systems with bounded rationality.

ABSTRACT: Socio-ecological systems are increasingly modelled by games played on complex networks. While the concept of Nash equilibrium assumes perfect rationality, in reality players display heterogeneous bounded rationality. Here we present a topological model of bounded rationality in socio-ecological systems, using the rationality parameter of the Quantal Response Equilibrium. We argue that system rationality could be measured by the average Kullback--Leibler divergence between Nash and Quantal Response Equilibria, and that the convergence towards Nash equilibria on average corresponds to increased system rationality. Using this model, we show that when a randomly connected socio-ecological system is topologically optimised to converge towards Nash equilibria, scale-free and small world features emerge. Therefore, optimising system rationality is an evolutionary reason for the emergence of scale-free and small-world features in socio-ecological systems. Further, we show that in games where multiple equilibria are possible, the correlation between the scale-freeness of the system and the fraction of links with multiple equilibria goes through a rapid transition when the average system rationality increases. Our results explain the influence of the topological structure of socio-ecological systems in shaping their collective cognitive behaviour, and provide an explanation for the prevalence of scale-free and small-world characteristics in such systems.

SUBMITTER: Kasthurirathna D

PROVIDER: S-EPMC4464151 | biostudies-literature | 2015 Jun

REPOSITORIES: biostudies-literature

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Emergence of scale-free characteristics in socio-ecological systems with bounded rationality.

Kasthurirathna Dharshana D Piraveenan Mahendra M

Scientific reports 20150611

Socio-ecological systems are increasingly modelled by games played on complex networks. While the concept of Nash equilibrium assumes perfect rationality, in reality players display heterogeneous bounded rationality. Here we present a topological model of bounded rationality in socio-ecological systems, using the rationality parameter of the Quantal Response Equilibrium. We argue that system rationality could be measured by the average Kullback--Leibler divergence between Nash and Quantal Respon ...[more]

PMID: 26065713

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Project description:BackgroundMost economic theories are based on the premise that individuals maximize their own self-interest and correctly incorporate the structure of their environment into all decisions, thanks to human intelligence. The influence of this paradigm goes far beyond academia-it underlies current macroeconomic and monetary policies, and is also an integral part of existing financial regulations. However, there is mounting empirical and experimental evidence, including the recent financial crisis, suggesting that humans do not always behave rationally, but often make seemingly random and suboptimal decisions.Methods and findingsHere we propose to reconcile these contradictory perspectives by developing a simple binary-choice model that takes evolutionary consequences of decisions into account as well as the role of intelligence, which we define as any ability of an individual to increase its genetic success. If no intelligence is present, our model produces results consistent with prior literature and shows that risks that are independent across individuals in a generation generally lead to risk-neutral behaviors, but that risks that are correlated across a generation can lead to behaviors such as risk aversion, loss aversion, probability matching, and randomization. When intelligence is present the nature of risk also matters, and we show that even when risks are independent, either risk-neutral behavior or probability matching will occur depending upon the cost of intelligence in terms of reproductive success. In the case of correlated risks, we derive an implicit formula that shows how intelligence can emerge via selection, why it may be bounded, and how such bounds typically imply the coexistence of multiple levels and types of intelligence as a reflection of varying environmental conditions.ConclusionsRational economic behavior in which individuals maximize their own self interest is only one of many possible types of behavior that arise from natural selection. The key to understanding which types of behavior are more likely to survive is how behavior affects reproductive success in a given population's environment. From this perspective, intelligence is naturally defined as behavior that increases the probability of reproductive success, and bounds on rationality are determined by physiological and environmental constraints.

Dataset Information

Emergence of scale-free characteristics in socio-ecological systems with bounded rationality.

Publications

Emergence of scale-free characteristics in socio-ecological systems with bounded rationality.

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