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The Emergence of Efficient Institutions and Social Interactions

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  • Dai, Shuanping

Abstract

Institutions are the equilibrium states of games, and the emergence of institutions is an evolutionary, stochastic, and (social) structural dependence process of interactions among agents. In this paper, we address the relationship between the institutional emergence and the structure of social interactions under the context of (network) coordination games. The model here shows when the agents are socially restricted, and individual decision-making is based on mutual agreements, inefficient institutions will be the stable states in the long run, say, institutions are locked-in inefficiently. When the agents are not restricted socially, the institutional stability will wander between two states. The efficient institutions can emerge only as the agents are facing strong cost constraints and, are in the contexts with relative high certainties, for instance, as the interactive population size is becoming smaller.

Suggested Citation

  • Dai, Shuanping, 2012. "The Emergence of Efficient Institutions and Social Interactions," MPRA Paper 47011, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:47011
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    References listed on IDEAS

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    More about this item

    Keywords

    Institutional Emergence; Coordination Games; Stochastically Stable Equilibrium; Network Formation; Social Distance;
    All these keywords.

    JEL classification:

    • B15 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Historical; Institutional; Evolutionary
    • B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Historical; Institutional; Evolutionary; Modern Monetary Theory;
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games

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