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When do Formal Rules and Informal Norms Converge?

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  • Desiree A. Desierto
  • John V. C. Nye

Abstract

We 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.

Suggested Citation

  • Desiree A. Desierto & John V. C. Nye, 2011. "When do Formal Rules and Informal Norms Converge?," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 167(4), pages 613-629, December.
    • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(201112)167:4_613:wdfrai_2.0.tx_2-i
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - 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 - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;

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