When do Formal Rules and Informal Norms Converge?
AbstractWe propose evolutionary dynamics to show how rules converge into norms. Individuals play a game of upholding or rejecting a rule, and the more they uphold the rule, the more it becomes established as a norm. We find that when individuals are rational, the initial state determines whether the rule converges into a norm; when individuals are boundedly rational, convergence occurs only if upholding rules is a risk-dominant strategy. This suggests why big-bang reforms that affect only the initial state can fail, while gradualist approaches that can sustain the risk dominance of upholding rules may be more effective.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 167 (2011)
Issue (Month): 4 (December)
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Web page: http://www.mohr.de/jite
Postal: Mohr Siebeck GmbH & Co. KG, P.O.Box 2040, 72010 Tübingen, Germany
Find related papers by JEL classification:
- P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary
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