In this paper we argue that authorities aid cooperation by means of direct coordination or the enforcement of re-commitment devices such as contract laws.Credible threats of violence allow this role. In a local interaction model, an authority forms if mutually connected individuals with sufficient combined punishment potential have signalled their willingness to form such an authority, conditional upon the willigness of others to do so. Given a specific timing of decisions, we analyse the conditions under which authorities arise and under which they evolve into a stationary state with only one or several remaining authorities.
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Find related papers by JEL classification: B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory D62 - Microeconomics - - Welfare Economics - - - Externalities D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General H1 - Public Economics - - Structure and Scope of Government H4 - Public Economics - - Publicly Provided Goods
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Martin J. Osborne & Ariel Rubinstein, 1994.
"A Course in Game Theory,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262650401.
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