Economists use the standard rational model to predict behaviour under a new policy regime and to evaluate the policy according to its impact on the welfare of the people affected. Experimental observation of behaviour casts some doubt on the predictive accuracy of the standard model, but the...

We examine an evolutionary model of bargaining behavior in a society where resources are finite. Agents who develop better strategies for bargaining and trading come to dominate the population. We show that successful agents exhibit loss aversion and an "endowment effect." When information is...