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Institutional Inertia and Institutional Change in an Expanding Normal-Form Game

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  • Torsten Heinrich

    ()
    (Institute of Institutional and Innovation Economics, University of Bremen, Hochschulring 4,28359 Bremen, Germany)

  • Henning Schwardt

    ()
    (Institute of Institutional and Innovation Economics, University of Bremen, Hochschulring 4,28359 Bremen, Germany)

Abstract

We investigate aspects of institutional change in an evolutionary game-theoretic framework, in principle focusing on problems of coordination in groups when new solutions to a problem become available. In an evolutionary game with an underlying dilemma structure, we let a number of new strategies become gradually available to the agents. The dilemma structure of the situation is not changed by these. Older strategies offer a lesser payoff than newly available ones. The problem that agents have to solve for realizing improved results is, therefore, to coordinate on newly available strategies. Strategies are taken to represent institutions; the coordination on a new strategy by agents, hence, represents a change in the institutional framework of a group. The simulations we run show a stable pattern regarding such institutional changes. A number of institutions are found to coexist, with the specific number depending on the relation of payoffs achievable through the coordination of different strategies. Usually, the strategies leading to the highest possible payoff are not among these. This can be taken to reflect the heterogeneity of rules in larger groups, with different subgroups showing different behavior patterns.

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Bibliographic Info

Article provided by MDPI, Open Access Journal in its journal Games.

Volume (Year): 4 (2013)
Issue (Month): 3 (August)
Pages: 398-425

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Handle: RePEc:gam:jgames:v:4:y:2013:i:3:p:398-425:d:27915

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Related research

Keywords: institutional economics; Veblenian economics; evolutionary game theory; simulation; institutional change;

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  1. Samuel Bowles, 1998. "Endogenous Preferences: The Cultural Consequences of Markets and Other Economic Institutions," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 75-111, March.
  2. Taleb, Nassim N. & Tapiero, Charles S., 2010. "Risk externalities and too big to fail," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(17), pages 3503-3507.
  3. Groenewegen, J. & Kerstholt, F.T.S. & Nagelkerke, A.G., 1995. "On integrating new and old institutionalism: Douglass North building bridges," Open Access publications from Tilburg University urn:nbn:nl:ui:12-127363, Tilburg University.
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  8. Paul R. Milgrom & Douglass C. North & Barry R. Weingast, 1990. "The Role Of Institutions In The Revival Of Trade: The Law Merchant, Private Judges, And The Champagne Fairs," Economics and Politics, Wiley Blackwell, vol. 2(1), pages 1-23, 03.
  9. John P. Watkins, 2010. "Mainstream Efforts to Tell a Better Story - Natural Selection as a Misplaced Metaphor: The Problem of Corporate Power," Journal of Economic Issues, M.E. Sharpe, Inc., vol. 44(4), pages 991-1008, December.
  10. Elinor Ostrom, 2000. "Collective Action and the Evolution of Social Norms," Journal of Economic Perspectives, American Economic Association, vol. 14(3), pages 137-158, Summer.
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  12. Villena, Mauricio G. & Villena, Marcelo J., 2004. "Evolutionary Game Theory and Thorstein Veblen’s Evolutionary Economics: Is EGT Veblenian?," MPRA Paper 28889, University Library of Munich, Germany.
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Cited by:
  1. Tassos Patokos, 2014. "Introducing Disappointment Dynamics and Comparing Behaviors in Evolutionary Games: Some Simulation Results," Games, MDPI, Open Access Journal, vol. 5(1), pages 1-25, January.

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