Stochastic Value Formation
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Stochastic Value Formation Jiabin Wu1 Accepted: 5 October 2020 © Springer Science+Business Media, LLC, part of Springer Nature 2020
Abstract We propose a simple model of value formation in two societies (communities). When forming values, individuals face conformity pressure within their own society and they are intolerant toward the other society. When such a value formation process is noisy, the interaction between conformity, intolerance and noise can give rise to interesting dynamic outcomes including two polarized societies and polarization across the two societies. Keywords Value formation · Identities · Conformity · Intolerance · Evolutionary game theory JEL Classification C73 · Z10
1 Introduction In the process of forming our value systems about the world, we are inevitably influenced by the society at large. The societal influence on an individual depends on how the individual identifies herself with others [4,5]. An individual may tend to form her value in the direction toward the values of others in the group/community/society that she identifies herself with, because she may derive esteem from peers by having a similar value, or because deviation is costly (psychologically and/or socially enforced). On the contrary, an individual may have an incentive to differentiate herself from those who she believes are having an opposing identity because she may derive self-esteem from differentiation, or it is mistrust and animosity that drives her tendency to differentiate. In this paper, we propose a dynamic model to describe the formation of values for individuals who are influenced by identities. The model considers two societies (communities), which are not intrinsically different in terms of the socioeconomic fundamentals, but are associated with distinct identities. Individuals can periodically update their values. Two forces drive their updating processes. First, individuals experience conformity pressure within their own society that is increasing in the
I sincerely thank the editor, the associate editor and two anonymous reviewers for their constructive suggestions. I also thank Jimmy Hicks for his excellent research assistance.
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Jiabin Wu [email protected] Department of Economics, University of Oregon, Eugene, USA
Dynamic Games and Applications
distance between their own values and the values of the other members of the society. As a result, the conformity pressure pushes individuals’ values closer to the societal average. Second, individuals feel intolerance toward the other society, and this intolerance increases as their own values depart further away from the values in the other society, which provides them the incentive to differentiate. The individual value updating processes give rise to a dynamic system characterizing the evolution of the value distributions in the two societies. We show that the stable states of the dynamic system must take the form of polarization across the two societies. That is, the values in one society concentrate on one extreme of the value spectrum while the v
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