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Endogenous games and equilibrium adoption of social norms and ethical constraints

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  • Conley, John P.
  • Neilson, William

Abstract

We consider a situation in which games are formed endogenously in two senses: (1) there is a pregame in which agents choose to learn a subset of all feasible strategies and can then employ only these strategies in subsequent play, and (2) agents choose their game partners through a costly search process. We show that at any subgame perfect equilibrium, agents will constrain their action sets in the pregame in such a way that a single social norm prevails. Thus, all agents in a society will abide by the same ethical standard, although what standard this will be cannot be predicted. We also show that these are essentially the only SPE outcomes. We suggest that this provides at least a partial explanation for experimental observations that agents apparently choose strategies that do not maximize their payoffs.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 66 (2009)
Issue (Month): 2 (July)
Pages: 761-774

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Handle: RePEc:eee:gamebe:v:66:y:2009:i:2:p:761-774

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Web page: http://www.elsevier.com/locate/inca/622836

Related research

Keywords: Behavioral economics Endogenous games Bilateral bargaining Prisoners' dilemma Social norms;

References

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Cited by:
  1. Neilson, William S., 2009. "A theory of kindness, reluctance, and shame for social preferences," Games and Economic Behavior, Elsevier, vol. 66(1), pages 394-403, May.
  2. Stenbacka, Rune & Tombak, Mihkel, 2012. "Make and buy: Balancing bargaining power," Journal of Economic Behavior & Organization, Elsevier, vol. 81(2), pages 391-402.

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