Working Papers,
Lund University, Department of Economics

Abstract: We present a model of how an individual’s preference for a specific behaviour can evolve as an adaptation to her social environment. Our key assumptions are that the decision maker (DM) (i) is boundedly rational in her ability to process information and evaluate which actions yield the highest payoff and (ii) can develop a subjective preference for actions. A stronger preference for an action reduces the probability of not taking it when it is optimal (omission error), but it also increases the probability of taking the action when it is suboptimal (commission error). The optimally adapted preference strikes a balance between these errors and depends on the DM’s environment. DMs are typically better off (in objective terms) if they are endowed with subjective preferences that deviate from maximisation of expected objective payoff. Importantly, if DMs can evaluate actions perfectly, they do not develop such biases. The results extend in an intuitive manner to n-player, two-strategy supermodular games. Our framework can be used to interpret preferences for specific actions or strategies (e.g., conditional cooperation, truth-telling, or norm-following) as psychological and cultural consequences of material incentives and social organisation.

Keywords: Preference evolution; Bounded rationality; Culture; Cooperation; Cognitive economics; Logit choice; Monotone comparative statics; Supermodular games

JEL-codes: C72; C73; D01; D83; D91

Language: English

34 pages, September 9, 2026

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